2002 Letter to Shareholders

Key highlight

We transform much of customer experience — such as unmatched selection, extensive product information, personalized recommendations, and other new software features — into largely a fixed expense. With customer experience costs largely fixed (more like a publishing model than a retailing model), our costs as a percentage of sales can shrink rapidly as we grow.

Highlights (5)

Traditional stores face a time-tested tradeoff between offering high-touch customer experience on the one hand and the lowest possible prices on the other. How can Amazon.com be trying to do both?

Our pricing objective is not to discount a small number of products for a limited period of time, but to offer low prices everyday and apply them broadly across our entire product range.

To prove its pricing claim, Amazon priced a rival book chain's own list of its 100 bestsellers — it took six hours across four superstores to find them all. The books cost $1,561 at the chain's stores and $1,195 at Amazon, a 23% savings; only 15 of the 100 were discounted in-store versus 76 at Amazon.

We display customer reviews critical of our products. We share our prime real estate — our product detail pages — with third parties, and, if they can offer better value, we let them.

From Bezos's list of ways Amazon is "not a normal store."

In short, what's good for customers is good for shareholders.