Amazon.com 2008 Annual Report Download - page 15

Our Expansion Places a Significant Strain on our Management, Operational, Financial and Other
Resources
We are rapidly and significantly expanding our global operations, including increasing our product and
service offerings and scaling our infrastructure to support our retail and services businesses. This expansion
increases the complexity of our business and places significant strain on our management, personnel, operations,
systems, technical performance, financial resources, and internal financial control and reporting functions. We
may not be able to manage growth effectively, which could damage our reputation, limit our growth and
negatively affect our operating results.
Our Expansion into New Products, Services, Technologies and Geographic Regions Subjects Us to
Additional Business, Legal, Financial and Competitive Risks
We may have limited or no experience in our newer market segments, and our customers may not adopt our
new product or service offerings, which include seller services, digital, web services and electronic devices.
These offerings may present new and difficult technology challenges, and we may be subject to claims if
customers of these offerings experience service disruptions or failures or other quality issues. In addition, our
gross profits in our newer activities may be lower than in our older activities, and we may not be successful
enough in these newer activities to recoup our investments in them. If any of this were to occur, it could damage
our reputation, limit our growth and negatively affect our operating results.
We May Experience Significant Fluctuations in Our Operating Results and Growth Rate
We may not be able to accurately forecast our growth rate. We base our expense levels and investment plans
on sales estimates. A significant portion of our expenses and investments is fixed, and we may not be able to
adjust our spending quickly enough if our sales are less than expected.
Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue
and operating profit growth depends on the continued growth of demand for the products and services offered by
us or our sellers, and our business is affected by general economic and business conditions worldwide. A
softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global
economies, may result in decreased revenue or growth.
Our net sales and operating results will also fluctuate for many other reasons, including due to risks
described elsewhere in this section and the following:
• our ability to retain and increase sales to existing customers, attract new customers, and satisfy our
customers’ demands;
• our ability to retain and expand our network of sellers;
• our ability to acquire merchandise on favorable terms, manage inventory, and fulfill orders;
• the introduction of competitive websites, products, services, price decreases, or improvements;
• changes in usage of the Internet and e-commerce, including in non-U.S. markets;
• timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure;
• the success of our geographic, service and product line expansions;
• the outcomes of legal proceedings and claims;
• variations in the mix of products and services we sell;
• variations in our level of merchandise and vendor returns;
• the extent to which we offer free shipping, continue to reduce product prices worldwide, and provide
additional benefits to our customers;
7