The Best One Yet - BONUS 💤 “Stock Market Snooze Pod” — We read Amazon’s 1st shareholder letter from 1997… to put you to sleep 😴

Episode Date: March 9, 2024

Since we all lose an hour of sleep during Daylight Savings this weekend, we whipped up a special podcast to help you fall asleep: We read the first shareholder letter from Amazon’s 1997 annual report. Of all the corporate reports out there, this one is fascinating — Jeff Bezos illustrates the master plan that he would spend the next 25 years executing on. But it’s still a corporate report, so you’ll drift off somewhere between the 4th and 7th time Bezos mentions “relentless customer focus.” This is the first ever… Stock Market Snooze Pod: The Sleepiest One Yet. Hosted on Acast. See acast.com/privacy for more information.

This is Nick. And this is Jack. And today's pod is the sleepiest one yet. Because today's pod is our first ever. Stock Market Snooze Pod. Yeties, you're about to lose one hour of sleep because of daylight savings. So besties, we're going to drift you off to bed with the snoriest business story we could find. Jack and I are about to read.

Word by word. line by line and number by number the entire corporate annual report of one surprise company that's right we're about to read the first ever shareholder letter by amazon dot com today's podcast is the entire report written by ceo jeff bezos 27 years ago you could drink some more milk or you could pop a melatonin Or you could listen to us, read all 2,341 words of Amazon's first corporate report. We're making business news for your beauty rest. We're turning Wall Street into wall sleep. So close your eyes and open your ears.

Close your spreadsheets. Open your bed sheets. Let's travel back to Seattle in 1997. Online bookstore run by a young, Jeff. I've just IPOed. Yeties, today's pod is the best one yet. Because today's pod is the sleepiest one yet.

This is the first ever stock market snooze pod. Let's hit our one story. Yeties, before we slip into our snooze pod, a quick word from our sponsors. And then we'll get right back to our bedtime voices.

Amazon.com 1997 shareholder letter to our shareholders. Amazon.com passed many milestones in 1997. By year end, we had served more than 1.5 million customers building 838% revenue growth to $147.8 million and extended our market leadership despite aggressive, competitive entry.

But this is day one for the Internet, and if we execute well for Amazon.com. Today, online commerce saves customers money and precious time. Tomorrow, through personalization, online commerce, will accelerate the very process of discovery. Amazon.com uses the internet to create real value for its customers and by doing so, hopes to create an enduring franchise, even in the established and large markets. We have a window of opportunity as larger players marshal the resources to pursue the online opportunity and as customers new to purchasing online are receptive to forming new relationships.

The competitive landscape has continued to evolve at a fast pace. Many large players have moved online with credible offerings and have devoted substantial energy and resources to building awareness, traffic, and social Our goal is to move quickly to solidify and extend our current position while we begin to pursue the online commerce opportunities in other areas. We see substantial opportunity in the large markets we are targeting. This strategy is not without risk. It requires serious investment and crisp execution against established franchise leaders. It's all about the long term.

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital. Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership. Customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis,

and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customers, base, our brand, and our infrastructure as we move to establish an enduring franchise. Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies. Accordingly, we want to share with you our fundamental management and decision-making approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy. We will continue to focus relentlessly on our customer. We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

We will continue to measure our programs and the effectiveness of our investments analytically to jettison to those that do not provide acceptable returns and to step up our investment in those that work best. We will continue to learn from both our successes and our failures. We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off. Others will not. And we will have learned another valuable lesson in either case. When forced to choose between optimizing the appearance of our gap accounting and maximizing

the present value of future cash flows, we'll take the cash flows. We will share our strategic thought processes with you, when we make bold choices to the extent competitive pressures allow, so that you may evaluate for yourselves whether we are making rational, long-term leadership investments. We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture, particularly in a business-incuring net losses. We will balance our focus on growth with emphasis on long-term profitability.

and capital management. At this stage, we choose to prioritize growth because we believe that scale is central to achieving the potential of our business model. We will continue to focus on hiring and retaining versatile and talented employees and continue to weigh their compensation to stock options rather than cash. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom, must think like and therefore must actually be an owner. We aren't so bold as to claim that the above is the right investment philosophy, but it's ours and we would be remiss if we weren't clear in the approach we have taken and will

continue to take. With this foundation, we would like to turn to a review of our business focus, our progress in 1997 and our outlook for the future. Obsess over customers. From the beginning, our folks, Our focus has been on offering our customers compelling value. We realized that the web was and still is the worldwide weight. Therefore, we set out to offer customers something they simply could not get any other way and began serving them with books. We brought them much more selection than was possible in a physical store.

Our store would now occupy six football fields. And we presented it in a useful, easy to search, and easy to breath. format in a store that's open 365 days a year, 24 hours a day. We maintained a dogged focus on improving the shopping experience and in 1997 substantially enhanced our store. We now offer customers gift certificates, one-click SM shopped, and vastly more reviews, content, browsing options, and recommendation features. We dramatically lowered prices further, increasing and customer value. Word of mouth remains the most important customer acquisition tool we have, and we are grateful for the trust our customers have placed in us. Repeat purchases and word of mouth

have combined to make Amazon.com the market leader in online bookselling. By many measures, Amazon.com came a long way in 1997. Sales grew from $15.7 million. in 1996 to $147.8 million in 1997, an 838% increase. Cumulative customer accounts grew from $180,000 to $1,510,000, a 738% increase. The percentage of orders from repeat customers grew from over 46% in the fourth quarter of 1996 to over 58% in the same period in 1997. In terms of audience reach per media metrics, our website went from a rank of 90th to within the top 20.

We established long-term relationships with many important strategic partners, including America Online, Yahoo, Excite, Netscape, GeoCities, AltaVista, at home, and During 1997, we worked hard to expand our business infrastructure to support these greatly increased traffic, sales, and service levels. Amazon.com's employee base grew from 158 to 614, and we significantly strengthened our management team. Distribution center capacity grew from 50,000 to 285,000 square feet, including a 70% expansion. of our Seattle facilities and the launch of our second distribution center in Delaware in November. Inventories rose to over 200,000 titles at year end, enabling us to improve availability for our customers. Our cash and investment balances at year end were $125 million, thanks to our initial public offering in May 1997,

and our $75 million loan affording us substantial strategic flexibility. Our employees. The past year's success is the product of a talented, smart, and hardworking group, and I take great pride in being part of this team. Setting the bar high on our approach to hiring has been and will continue to be the single most important element

of Amazon.com's success. It's not easy to work here. When I interview people, I tell them, you can work long, hard, or smart, but at Amazon.com, you can't choose two out of the three. But we are working to build something important, something that matters to our customers, something that we can tell all of our grandchildren about. Such things aren't meant to be easy. We are incredibly fortunate to have this group of dedicated employees who sacrifices and

passion build Amazon.com. Goals for 1998. We are still in the early stages of learning how to bring new value to our customers through internet commerce and merchandising. Our goal remains to continue to solidify and extend our brand and our customer base. This requires sustained investment in systems and infrastructure to support outstanding customer convenience, selection, and service while we grow. We are planning to add music.

to our product offering, and over time, we believe that other products may be prudent investments. We also believe there are significant opportunities to better serve our customers overseas, such as reducing delivery times and better tailoring the customer experience. To be certain, a big part of the challenge for us will lie not in finding new ways to expand our business, but in prioritizing our investments. We now know vastly more about online commerce than when Amazon.com was founded, but we still have so much to learn. Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The challenges and hurdles we face to make our long-term vision for Amazon.com a reality are several.

Aggressive, capable, well-funded competition, considerable growth challenges, and execution. risk, the risk of product and geographic expansion, and the need for large continuing investments to meet an expanding market opportunity. However, as we've long said, online book selling and online commerce in general should prove to be a very large market. And it's likely that a number of companies will see significant benefit. We feel good about what we've done and even more excited about what we want to do. 1997 was indeed an incredible year. We at Amazon.com are grateful to our customers

for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement. Sincerely, Jeffrey P. Bezos, founder and chief executive officer, Amazon.com, Inc. Yetis, we hope you're an REM by now, because we have another word from our sponsors. And then Jack and I will get back to our bedtime voices. Item one. Business.

This annual report on Form 10K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing. Actual results may differ materially. from those expressed in forward-looking statements. See item 7 of part 2. Management's discussion and analysis of financial condition and results of operations.

Forward-looking statements. Amazon.com, Inc., a Fortune 500 company, opened its virtual doors on the World Wide Web in July 1995, and today offers Earth's Vegas selection. We seek to be Earth's most customer-centric company where customers can find and discover anything they might want to buy online and to endeavor to offer customers the lowest possible prices. Business strategy.

Our business strategy is to relentlessly focus on customer experience by offering our customers low prices, convenience, and a wide selection of merchandise to provide e-commerce solutions and services to other businesses and to offer web, services applications to developers. Price. We endeavor to offer our customers the lowest prices possible through low everyday product pricing and free shipping offers.

We also strive to improve our operating efficiencies so that we can pass along the associated savings to our customers in the form of lower prices. We enable third-party sellers to offer products on our sites in many instances alongside our product selection and set their own retail prices. Convenience. Our software engineers, computer scientists, and management team focus on continuous innovation to provide further convenience for our customers. We work to earn repeat purchases by providing easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature-rich content, and a trusted transaction environment. Key features of our websites include

editorial and customer reviews, manufacturer product information, gift guides, web pages tailored to individual preferences such as recommendations and notifications, one-click technology, secure payment systems, image uploads, digital content, searching on our websites as well as the internet, browsing, and the ability to view selected interior pages and citations, and search for the entire contents of many of the books we offer with our look inside the book and search inside the book features. Our community of online customers also creates feature-rich content, including product reviews, online recommendation lists, wish lists, buying guides, and wedding and baby registries. We endeavor to fulfill customer orders quickly and to provide intuitive self-service features

that assist our customers when they have questions. We communicate our fulfillment promise in several ways, such as presenting up-to-date inventory availability information, delivery date estimates, and options for expedited delivery, as well as delivery shipment notifications. Additionally, customers can use the Your Account website features to track order and shipment status, review estimated delivery dates,

cancel unshipped items, change delivery instructions and payment options, Combine orders, edit gift options, and return items. We fulfill customer orders in a number of ways, including through our U.S. and international fulfillment centers and warehouses, through fulfillment centers operated under co-sourcing arrangements, including our fulfillment center supporting www.amazon.co.jp. Through outsourced fulfillment providers,

including our fulfillment providers supporting www. and through other third-party fulfillment and arrangements. We operate customer service centers globally, which are supplemented by several co-sourcing customer service arrangements with third parties. See item two of part one, properties for additional information about fulfillment centers and customer service locations. Selection. To provide the widest possible selection for our customers worldwide, we have designed our websites to enable,

millions of unique products to be sold by us and by third parties across dozens of product categories such as apparel shoes and accessories baby care products beauty books camera and photography cell phone and service computers and computer add-ons consumer electronics DVDs including rentals and videos Gourmet food Health and personal care Home, garden and outdoor living products Jewelry and watches

Kitchenware and housewares magazine subscriptions Music and musical instruments Office products Software Sports and outdoors Tools and hardware Toys and hardware

Toys and and video games. And so on, and so on, and so on, et cetera, et cetera, et cetera. That is the end of today's news pod. The 1997 Amazon.com annual shareholder letter and 10K report. We hope it was the sleepiest one yet. Good night, yetis, good night besties, good night, good night shareholders, everywhere. everywhere.