Amazon.com 2007 Annual Report Download - page 41

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Supplemental Information
Supplemental information about shipping results is as follows:
December 31,
2007 2006 2005
(in millions)
Shipping Activity:
Shipping revenue (1)(2) ............................................ $ 740 $567 $511
Outbound shipping costs ............................................ (1,174) (884) (750)
Net shipping cost .................................................. $ (434) $(317) $(239)
Year-over-year Percentage Growth:
Shipping revenue .................................................. 31% 11% 22%
Outbound shipping costs ............................................ 33 18 22
Net shipping cost .................................................. 37 32 22
Percent of Net Sales:
Shipping revenue .................................................. 5.0% 5.3% 6.0%
Outbound shipping costs ............................................ (7.9) (8.3) (8.8)
Net shipping cost .................................................. (2.9)% (3.0)% (2.8)%
(1) Excludes amounts earned on shipping activities by sellers where we do not provide the fulfillment service.
(2) Includes amounts earned from Amazon Prime membership and Fulfillment by Amazon programs.
We believe that offering low prices to our customers is fundamental to our future success. One way we offer
lower prices is through free-shipping offers that result in a net cost to us in delivering products, as well as
through membership in Amazon Prime. To the extent our customers accept and use our free shipping offers at an
increasing rate, including memberships in Amazon Prime, our net cost of shipping will increase. We seek to
partially mitigate the costs of lowering prices over time through achieving higher sales volumes, negotiating
better terms with our suppliers, and achieving better operating efficiencies.
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