To our shareowners:
A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married
Well, I’m pleased to report that Amazon hasn’t been monogamous in this regard. After two decades of risk taking and teamwork, and with generous helpings of good fortune all along the way, we are now happily wed to what I believe are three such life partners: Marketplace, Prime, and AWS. Each of these offerings was a bold bet at first, and sensible people worried (often!) that they could not work. But at this point, it’s become pretty clear how special they are and how lucky we are to have them. It’s also clear that there are no sinecures in business. We know it’s our job to always nourish and fortify them.
We’ll approach the job with our usual tools: customer obsession rather than competitor focus, heartfelt passion for invention, commitment to operational excellence, and a willingness to think long-term. With good execution and a bit of continuing good luck, Marketplace, Prime, and AWS can be serving customers and earning financial returns for many years to come.
Marketplace’s early days were not easy. First, we launched Amazon Auctions. I think seven people came, if you count my parents and siblings. Auctions transformed into zShops, which was basically a fixed price version of Auctions. Again, no customers. But then we morphed zShops into Marketplace. Internally, Marketplace was known as SDP for Single Detail Page. The idea was to take our most valuable retail real estate – our product detail pages – and let third-party sellers compete against our own retail category managers. It was more convenient for customers, and within a year, it accounted for 5% of units. Today, more than 40% of our units are sold by more than two million third-party sellers worldwide. Customers ordered more than two billion units from sellers in 2014.
The success of this hybrid model accelerated the Amazon flywheel. Customers were initially drawn by our fast-growing selection of Amazon-sold products at great prices with a great customer experience. By then allowing third parties to offer products side-by-side, we became more attractive to customers, which drew even more sellers. This also added to our economies of scale, which we passed along by lowering prices and eliminating shipping fees for qualifying orders. Having introduced these programs in the U.S., we rolled them out as quickly as we could to our other geographies. The result was a marketplace that became seamlessly integrated with all of our global websites.
We work hard to reduce the workload for sellers and increase the success of their businesses. Through our Selling Coach program, we generate a steady stream of automated machine-learned “nudges” (more than 70 million in a typical week) – alerting sellers about opportunities to avoid going out-of-stock, add selection that’s selling, and sharpen their prices to be more competitive. These nudges translate to billions in increased sales to sellers.
To further globalize Marketplace, we’re now helping sellers in each of our geographies – and in countries where we don’t have a presence – reach out to our customers in countries outside their home geographies. We hosted merchants from more than 100 different countries last year, and helped them connect with customers in 185 nations.
Almost one-fifth of our overall third-party sales now occur outside the sellers’ home countries, and our merchants’ cross-border sales nearly doubled last year. In the EU, sellers can open a single account, manage their business in multiple languages, and make products available across our five EU websites. More recently, we’ve started consolidating cross-border shipments for sellers and helping them obtain ocean shipping from Asia to Europe and North America at preferential, bulk rates.
Marketplace is the heart of our fast-growing operations in India, since all of our selection in India is offered by third-party sellers. http://Amazon.in now offers more selection than any other e-commerce site in India – with more than 20 million products offered from over 21,000 sellers. With our Easy Ship service, we pick up products from a seller and handle delivery all the way to the end customer. Building upon Easy Ship, the India team recently piloted Kirana Now, a service that delivers everyday essentials from local kirana (mom and pop) stores to customers in two to four hours, adding convenience for our customers and increasing sales for the stores participating in the service.
Marketplace是我们在印度快速增长的驱动核心，因为我们在印度的所有商品都是由第三方卖家提供，Amazon印度站目前是全印度品项最多的电子商务网站－由2.1万名卖家提供超过2000万种商品。我们提供Easy Ship服务，从卖家到买家的整个物流都由我们来处理。印度团队基于Easy Ship的基础上，最近开始了一项新业务Kirana Now。这项服务可在两到四个小时内，向消费者提供kirana商店的日常必需品。这为我们的顾客增加便利，并增加了kirana商店的销售额
Perhaps most important for sellers, we’ve created Fulfillment by Amazon. But I’ll save that for after we discuss Prime.
Ten years ago, we launched Amazon Prime, originally designed as an all-you-can-eat free and fast shipping program. We were told repeatedly that it was a risky move, and in some ways it was. In its first year, we gave up many millions of dollars in shipping revenue, and there was no simple math to show that it would be worth it. Our decision to go ahead was built on the positive results we’d seen earlier when we introduced Free Super Saver Shipping, and an intuition that customers would quickly grasp that they were being offered the best deal in the history of shopping. In addition, analysis told us that, if we achieved scale, we would be able to significantly lower the cost of fast shipping.
10年前，我们发布了Prime服务，最初是为了提供吃到饱的快速运送服务。我们被一再告知，这会有很大的风险。从某些层面来说，的确如此。最初的一年，我们因此牺牲了数百万的物流收入，而且无从证明这么做是有价值的。我们之所以选择继续实行，是因为我们看到先前的Free Super Saver Shipping得到的积极结果，因此直觉地认为顾客会迅速了解Prime服务有多么棒，能够提供他们有史以来最优惠的服务。此外，分析师告诉我们，如果我们形成规模经济，将能够大大降低物流的成本。
Our owned-inventory retail business was the foundation of Prime. In addition to creating retail teams to build each of our category-specific online “stores,” we have created large-scale systems to automate much of inventory replenishment, inventory placement, and product pricing. The precise delivery-date promise of Prime required operating our fulfillment centers in a new way, and pulling all of this together is one of the great accomplishments of our global operations team. Our worldwide network of fulfillment centers has expanded from 13 in 2005, when we launched Prime, to 109 this year. We are now on our eighth generation of fulfillment center design, employing proprietary software to manage receipt, stowing, picking, and shipment. Amazon Robotics, which began with our acquisition of Kiva in 2012, has now deployed more than 15,000 robots to support the stowing and retrieval of products at a higher density and lower cost than ever before. Our ownedinventory retail business remains our best customer-acquisition vehicle for Prime and a critical part of building out categories that attract traffic and third-party sellers.
Though fast delivery remains a core Prime benefit, we are finding new ways to pump energy into Prime. Two of the most important are digital and devices.
In 2011 we added Prime Instant Video as a benefit, now with tens of thousands of movies and TV episodes available for unlimited streaming in the U.S., and we’ve started expanding the program into the U.K. and Germany as well. We’re investing a significant amount on this content, and it’s important that we monitor its impact. We ask ourselves, is it worth it? Is it driving Prime? Among other things, we watch Prime free trial starts, conversion to paid membership, renewal rates, and product purchase rates by members entering through this channel. We like what we see so far and plan to keep investing here.
2011年，我们新增了Prime Instant Video作为Prime服务的内容。现在，美国站有成千上万种电影和电视剧可供用户无限次数播放。我们也开始扩大英国站和德国站的Prime服务。我们大量投资于内容，并不断关注内容的影响力。我们会问自己：这么做是否值得？它能驱动Prime会员数增长吗？我们还观察了Prime的免费试用者数量、转换为付费用户的比率、续订率和购买率。目前为止，我们对此表现感到满意，并计划加大投资。
While most of our PIV spend is on licensed content, we’re also starting to develop original content. The team is off to a strong start. Our show Transparent became the first from a streaming service to win a Golden Globe for best series and Tumble Leaf won the Annie for best animated series for preschoolers. In addition to the critical acclaim, the numbers are promising. An advantage of our original programming is that its first run is on Prime – it hasn’t already appeared anywhere else. Together with the quality of the shows, that first run status appears to be one of the factors leading to the attractive numbers. We also like the fixed cost nature of original programming. We get to spread that fixed cost across our large membership base. Finally, our business model for original content is unique. I’m pretty sure we’re the first company to have figured out how to make winning a Golden Globe pay off in increased sales of power tools and baby wipes!
尽管我们的支出多用于授权内容，但我们也开始推出我们的原创内容。团队开局表现不错。我们的节目《Transparent》是流媒体服务中第一个获得金球奖（Golden Globe）的系列影集，而《Tumble Leaf》则获得了安妮奖（Annie）学龄前儿童最佳动画片奖。除了广受好评外，数据表现也很亮眼。原创内容的一个优点是，它在其他地方都没出现过，首次开播就是在Prime上进行。加上节目的质量很好，首次开播似乎是吸引观众的原因之一。我们还喜欢原创内容的「固定成本」特性。我们将固定成本分摊至我们的广大会员基础上。最后，我们原创内容的商业模式是独一无二的。我敢肯定，我们是第一家找到如何透过增加电动工具和婴儿湿巾的销售额来赢得金球奖的公司！
Amazon designed and manufactured devices – from Kindle to Fire TV to Echo – also pump energy into Prime services such as Prime Instant Video and Prime Music, and generally drive higher engagement with every element of the Amazon ecosystem. And there’s more to come – our device team has a strong and exciting roadmap ahead.
Amazon设计和制造的设备－从Kindle到Fire TV再到Echo，也将能量注入Prime服务。例如Prime Instant Video和Prime Music，驱动Amazon生态系统各个要素的彼此相连。未来将会更加精采可期－我们的硬件团队拥有强大而令人兴奋的发展计划。
Prime isn’t done improving on its original fast and free shipping promise either. The recently launched Prime Now offers Prime members free two-hour delivery on tens of thousands of items or one-hour delivery for a $7.99 fee. Lots of early reviews read like this one, “In the past six weeks my husband and I have made an embarrassing number of orders through Amazon Prime Now. It’s cheap, easy, and insanely fast.” We’ve launched in Manhattan, Brooklyn, Miami, Baltimore, Dallas, Atlanta, and Austin, and more cities are coming soon.
Prime没有违背其最初的快速免费送货承诺。最近，我们推出Prime Now。只要7.99美元，Prime会员可以在1小时内收到商品。若你可以接受2小时内收获，那将不用收取额外费用。先前的评论都是这样写的：「过去六周，我和我的丈夫透过Amazon Prime Now下了许多订单订单。这项服务便宜、方便、快捷。」我们已经在曼哈顿、布鲁克林、迈阿密、巴尔的摩、达拉斯、亚特兰大和奥斯汀推出这项服务，并且很快就会推展到更多城市。
Now, I’d like to talk about Fulfillment by Amazon. FBA is so important because it is glue that inextricably links Marketplace and Prime. Thanks to FBA, Marketplace and Prime are no longer two things. In fact, at this point, I can’t really think about them separately. Their economics and customer experiences are now happily and deeply intertwined.
FBA is a service for Marketplace sellers. When a seller decides to use FBA, they stow their inventory in our fulfillment centers. We take on all logistics, customer service, and product returns. If a customer orders an FBA item and an Amazon owned-inventory item, we can ship both items to the customer in one box – a huge efficiency gain. But even more important, when a seller joins FBA, their items can become Prime eligible.
Maintaining a firm grasp of the obvious is more difficult than one would think it should be. But it’s useful to try. If you ask, what do sellers want? The correct (and obvious) answer is: they want more sales. So, what happens when sellers join FBA and their items become Prime eligible? They get more sales.
Notice also what happens from a Prime member’s point of view. Every time a seller joins FBA, Prime members get more Prime eligible selection. The value of membership goes up. This is powerful for our flywheel. FBA completes the circle: Marketplace pumps energy into Prime, and Prime pumps energy into Marketplace.
In a 2014 survey of U.S. sellers, 71% of FBA merchants reported more than a 20% increase in unit sales after joining FBA. In the holiday period, worldwide FBA units shipped grew 50% over the prior year and represented more than 40% of paid third-party units. Paid Prime memberships grew more than 50% in the U.S. last year and 53% worldwide. FBA is a win for customers and a win for sellers.
Amazon Web Services
A radical idea when it was launched nine years ago, Amazon Web Services is now big and growing fast. Startups were the early adopters. On-demand, pay-as-you-go cloud storage and compute resources dramatically increased the speed of starting a new business. Companies like Pinterest, Dropbox, and Airbnb all used AWS services and remain customers today.
Since then, large enterprises have been coming on board as well, and they’re choosing to use AWS for the same primary reason the startups did: speed and agility. Having lower IT cost is attractive, and sometimes the absolute cost savings can be enormous. But cost savings alone could never overcome deficiencies in performance or functionality. Enterprises are dependent on IT – it’s mission critical. So, the proposition, “I can save you a significant amount on your annual IT bill and my service is almost as good as what you have now,” won’t get too many customers. What customers really want in this arena is “better and faster,” and if “better and faster” can come with a side dish of cost savings, terrific. But the cost savings is the gravy, not the steak.
IT is so high leverage. You don’t want to imagine a competitor whose IT department is more nimble than yours. Every company has a list of technology projects that the business would like to see implemented as soon as possible. The painful reality is that tough triage decisions are always made, and many projects never get done. Even those that get resourced are often delivered late or with incomplete functionality. If an IT department can figure out how to deliver a larger number of business-enabling technology projects faster, they’ll be creating significant and real value for their organization.
These are the main reasons AWS is growing so quickly. IT departments are recognizing that when they adopt AWS, they get more done. They spend less time on low value-add activities like managing datacenters, networking, operating system patches, capacity planning, database scaling, and so on and so on. Just as important, they get access to powerful APIs and tools that dramatically simplify building scalable, secure, robust, high-performance systems. And those APIs and tools are continuously and seamlessly upgraded behind the scenes, without customer effort.
Today, AWS has more than a million active customers as companies and organizations of all sizes use AWS in every imaginable business segment. AWS usage grew by approximately 90% in the fourth quarter of 2014 versus the prior year. Companies like GE, Major League Baseball, Tata Motors, and Qantas are building new applications on AWS – these range from apps for crowdsourcing and personalized healthcare to mobile apps for managing fleets of trucks. Other customers, like NTT DOCOMO, the Financial Times, and the Securities and Exchange Commission are using AWS to analyze and take action on vast amounts of data. And many customers like Conde´ Nast, Kellogg’s, and News Corp are migrating legacy critical applications and, in some cases, entire datacenters to AWS.
如今，随着各种规模的公司和组织，在各个领域中使用AWS，AWS拥有超过一百万名活跃客户。2014年第四季度，AWS使用量同比增长了约90％。通用电气、美国职业棒球大联盟、塔塔汽车和澳洲航空等公司，正在AWS上建构新应用－从众包、个性化医疗到管理卡车车队的新应用。NTT DOCOMO、金融时报和证券交易委员会，正在使用AWS来分析大量数据并以此采取行动。Conde´ Nast，Kellogg’s和News Corp等客户，正在将旧应用迁移至AWS，有些客户甚至将整个数据中心迁移至AWS。
We’ve increased our pace of innovation as we’ve gone along – from nearly 160 new features and services in 2012, to 280 in 2013, and 516 last year. There are many that would be interesting to talk about – from WorkDocs and WorkMail to AWS Lambda and the EC2 Container Service to the AWS Marketplace – but for purposes of brevity, I’m going to limit myself to one: our recently introduced Amazon Aurora. We hope Aurora will offer customers a new normal for a very important (but also very problematic) technology that is a critical underpinning of many applications: the relational database. Aurora is a MySQL-compatible database engine that offers the speed and availability of high-end commercial databases with the simplicity and cost effectiveness of open source databases. Aurora’s performance is up to 5x better than typical MySQL databases, at one-tenth the cost of commercial database packages. Relational databases is an arena that’s been a pain point for organizations and developers for a long time, and we’re very excited about Aurora.
我们一直不断创新。2012年，AWS包含近160种新功能和服务，到2013年这个数字是280种，到2014年则变成516种。这中间有很多有趣的话题－从WorkDocs、WorkMail到AWS Lambda，从EC2 Container Service到AWS Marketplace。为了篇幅简洁起见，我将只提及一项：我们最近推出的Amazon Aurora。我们希望Aurora为客户提供一项非常重要（但经常是个问题）的技术方案，提供很多应用的关键基础－关系数据库。Aurora是与MySQL兼容的数据库引擎，可提供高端商业数据库所需的速度及可用性，并兼具开源数据库的易用性和低成本。Aurora的性能比典型的MySQL数据库高出5倍，价格却是商业数据库的十分之一。关系数据库是解决长期困扰组织和开发人员痛点的起点，我们对Aurora的前景感到无比兴奋。
I believe AWS is one of those dreamy business offerings that can be serving customers and earning financial returns for many years into the future. Why am I optimistic? For one thing, the size of the opportunity is big, ultimately encompassing global spend on servers, networking, datacenters, infrastructure software, databases, data warehouses, and more. Similar to the way I think about Amazon retail, for all practical purposes, I believe AWS is market-size unconstrained.
Second, its current leadership position (which is significant) is a strong ongoing advantage. We work hard – very hard – to make AWS as easy to use as possible. Even so, it’s still a necessarily complex set of tools with rich functionality and a non-trivial learning curve. Once you’ve become proficient at building complex systems with AWS, you do not want to have to learn a new set of tools and APIs assuming the set you already understand works for you. This is in no way something we can rest on, but if we continue to serve our customers in a truly outstanding way, they will have a rational preference to stick with us.
In addition, also because of our leadership position, we now have thousands of what are effectively AWS ambassadors roaming the world. Software developers changing jobs, moving from one company to another, become our best sales people: “We used AWS where I used to work, and we should consider it here. I think we’d get more done.” It’s a good sign that proficiency with AWS and its services is already something software developers are adding to their resumes.
Finally, I’m optimistic that AWS will have strong returns on capital. This is one we as a team examine because AWS is capital intensive. The good news is we like what we see when we do these analyses. Structurally, AWS is far less capital intensive than the mode it’s replacing – do-it-yourself datacenters – which have low utilization rates, almost always below 20%. Pooling of workloads across customers gives AWS much higher utilization rates, and correspondingly higher capital efficiency. Further, once again our leadership position helps: scale economies can provide us a relative advantage on capital efficiency. We’ll continue to watch and shape the business for good returns on capital.
AWS is young, and it is still growing and evolving. We think we can continue to lead if we continue to execute with our customers’ needs foremost in mind.
Before closing, I want to take a moment to update shareowners on something we’re excited about and proud of. Three years ago we launched an innovative employee benefit – the Career Choice program, where we pre-pay 95% of tuition for employees to take courses for in-demand fields, such as airplane mechanic or nursing, regardless of whether the skills are relevant to a career at Amazon. The idea was simple: enable choice.
We know that, for some of our fulfillment and customer service center employees, Amazon will be a career. For others, Amazon might be a stepping stone on the way to a job somewhere else – a job that may require new skills. If the right training can make the difference, we want to help, and so far we have been able to help over 2,000 employees who have participated in the program in eight different countries. There’s been so much interest that we are now building onsite classrooms so college and technical classes can be taught inside our fulfillment centers, making it even easier for associates to achieve these goals.
There are now eight FCs offering 15 classes taught onsite in our purpose-built classrooms with high-end technology features, and designed with glass walls to inspire others to participate and generate encouragement from peers. We believe Career Choice is an innovative way to draw great talent to serve customers in our fulfillment and customer service centers. These jobs can become gateways to great careers with Amazon as we expand around the world or enable employees the opportunity to follow their passion in other in-demand technical fields, like our very first Career Choice graduate did when she started a new career as a nurse in her community.
I would also like to invite you to come join the more than 24,000 people who have signed up so far to see the magic that happens after you click buy on http://Amazon.com by touring one of our fulfillment centers. In addition to U.S. tours, we are now offering tours at sites around the world, including Rugeley in the U.K. and Graben in Germany and continuing to expand. You can sign up for a tour at http://www.amazon.com/fctours.
Marketplace, Prime, and Amazon Web Services are three big ideas. We’re lucky to have them, and we’re determined to improve and nurture them – make them even better for customers. You can also count on us to work hard to find a fourth. We’ve already got a number of candidates in work, and as we promised some twenty years ago, we’ll continue to make bold bets. With the opportunities unfolding in front of us to serve customers better through invention, we assure you we won’t stop trying.
As always, I attach a copy of our original 1997 letter. Our approach remains the same, because it’s still Day 1.
Jeffrey P. Bezos
Founder and Chief Executive Officer