Last week, Jeff Bezos released his final letter to shareholders before stepping down as Amazon CEO, a position he has held for 27 years at the company he founded. In the letter, he reflected on the company’s history and astronomical growth, plus shared his vision for the future of the business. To summarise the lengthy letter, we’ve taken five key points of information to share with you from Bezos’ letter, and what they mean for customers, sellers, and vendors.
1) Amazon’s net income in 2020 was $21.3 billion
Plain and simple, Amazon’s growth in terms of income was huge. The net income for 2019 was $11.5 billion, meaning an 84.08% increase. Bezos spends a good part of the letter breaking down what the 2020 net income means in terms of compensation, expenses, and investments.
2) Third-party sellers drive Amazon’s business model, saving customers time and money with a vast selection
In his letter, Bezos’ states: “Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes.” This speaks to the incredible selection of items, the ease of searchability, and the reliability of Amazon’s service. In terms of the volume of business, the Selling Partner Services team estimated that 2020 third-party seller profits were between $25 billion and $39 billion. More than 1.9 million small and medium-sized businesses sell on Amazon’s marketplace, and they make up close to 60% of retail sales.
3) In 2020, Amazon hired 500,000 people as the pandemic increased online shopping demand
Bezos noted that hiring and compensation was a big expenditure for the company. The letter states that last year, employees earned $80 billion, plus another $11 billion to include benefits and various payroll taxes. This totals $91 billion.
4) Amazon employs 1.3 million employees globally, and most of them are happy
In defense of Amazon labor practices and the nebulous issues surrounding the company, Bezos discussed that “fulfillment center employees, 94% say they would recommend Amazon to a friend as a place to work.” He detailed some related statistics, but spent less time defending the company before he said, “I think we need to do a better job for our employees… Despite what we’ve accomplished, it’s clear to me that we need a better vision for our employees’ success. We have always wanted to be Earth’s Most Customer-Centric Company. We won’t change that. It’s what got us here. But I am committing us to an addition. We are going to be Earth’s Best Employer and Earth’s Safest Place to Work.”
He said in his new role as Executive Chair, he was going to work with the Ops team to dive deep into safety issues, as well as expanding benefits, upskilling, and developing other opportunities.
5) AWS, Prime, and Alexa are all growing pieces of the Amazon business
When the company began in 1997, there were no third-party sellers, no Amazon Prime, no Amazon Web Services, and no AI-based programs like Alexa. Parts of Bezos’ letter detail the ways Amazon has grown and innovated to service customers. He details that there are currently more than 100 million smart home devices to Alexa. Amazon Web Services serves millions of customers and ended 2020 with a $50 billion annualised run rate. There are more than 200 million Amazon Prime members. Explaining the ways in which various pieces of the Amazon business have grown and what value they create for shareholders is a big part of the letter.
The future of Amazon
Last April, Bezos’ 2019 letter to shareholders focused heavily on the COVID-19 pandemic and the company’s steps to address concerns about job creation, crisis, and facilities. This year’s 2020 letter marks a change, as Bezos attempts to say goodbye and also reflect on the company’s history. Every year, he shares the first (1997) letter at the end of the current year’s letter.
Later this year, Andy Jassy, who is currently the CEO of Amazon Web Services (AWS) will replace Bezos and gain the opportunity to either change or deviate from Bezos’ style.
As Bezos says in his letter: “If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with. Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.”
It will be interesting to see what’s next for Amazon, in light of these goals. You can read the full letter to shareholders on About Amazon.