Amazon.com 2008 Annual Report Download - page 40

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International segment gross margins in 2007 increased by 38 basis points compared to 2006 resulting
primarily from increases in sales of products by other sellers, offset partially by our efforts to continue reducing
prices for our customers, including from our free shipping offers and Amazon Prime, and a larger percent of
overall sales in lower margin categories such as electronics and other general merchandise.
Supplemental Information
Supplemental information about shipping results is as follows:
December 31,
2008 2007 2006
(in millions)
Shipping Activity:
Shipping revenue (1)(2) ............................................ $ 835 $ 740 $567
Outbound shipping costs ............................................ (1,465) (1,174) (884)
Net shipping cost .................................................. $ (630) $ (434) $(317)
Year-over-year Percentage Growth:
Shipping revenue .................................................. 13% 31% 11%
Outbound shipping costs ............................................ 25 33 18
Net shipping cost .................................................. 45 37 32
Percent of Net Sales:
Shipping revenue .................................................. 4.4% 5.0% 5.3%
Outbound shipping costs ............................................ (7.6) (7.9) (8.3)
Net shipping cost .................................................. (3.2)% (2.9)% (3.0)%
(1) Excludes amounts earned on shipping activities by third-party 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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