5 Must-See Quotes by Jeff Bezo's Annual Amazon Letter – The Motley Fool

Jeff Bezos, founder and CEO of Amazon (NASDAQ: AMZN) has said many smart things for more than 20 years with shareholder letters. His last edition fell this week, and it's full of valuable nuggets.

Below are five that stand out. They are meaningful, not only to Amazon shareholders, but also to business people in all stripes, and look at how the company was juggernaut it is today.

  Woman holding an open book that bursts with light.

Image Source: Getty Images [1[ads1]9659006] First and foremost, a fulfillment company

If you are unfamiliar, there are two types of products for sale on Amazon's website: those actually made by Amazon, and those third parties listed on the site. Amazon retains all the money from the previous one, but only takes an average of the latter. Third parties then use the fulfillment of Amazon to get their packages in the right hands.

Way back in 1999, only 3% of all goods were sold on Amazon by third parties. Today, it stands at a full 58%. How did we get here?

Third Party Sellers Kick Our First Party Support. Poor

The compound annual growth for our first-party business in that period is 25%. But at the same time, third-party sales have increased from $ 0.1 billion to $ 160 billion – a compound annual growth of 52%.

In other words, Amazon's goods sell just fine. But third parties do even better. It should not be because Amazon's margins are probably higher for third-party fulfillment.

Success is equal to efficiency and wandering

In business today, efficiency is everything. By cutting out every bit of waste, companies can maximize profitability. But while efficiency is important, it also comes at a price – one that many competitors often overlook: "Wandering" is thrown out of the window.

And it can be a terrible long-term approach:

[W] change in business is not effective … but it is also not coincidental. It is guided … and driven by a deep conviction that the cost of customers is large enough to be worth a little messy and tangential to find the way there. Hiking is an important balance against efficiency. You must hire both. The overall findings – the "non-linear" – are very likely to require walking.

Bezos continues to tell how inefficient migration led to many services we love today, such as Amazon Web Services and the company's database solution, DynamoDB.

Mistakes are the key to success

Another counterintuitive approach that has paid off well for Amazon has been its attitude to failure. Simply put, it's mandatory – in the right doses.

When a company grows, everything needs to scale, including the size of your failed experiments. If the size of your errors does not grow, you will not find out in a size that can actually move the needle. Amazon will experiment on the right scale for a company of our size if we sometimes have multibillion-dollar errors.

The good news for shareholders is that a single big winning bet can more than cover the cost of many losers.

Bezos then explains how the work began on the failed Fire Phone and the popular Echo at the same time. While critics hailed the former, Bezos points out that the failure process helped inform about how to better place echoes – which ultimately leads to its accidental success.

We're still in the early innings

It would be easy to assume that Amazon doesn't have that much space to grow. Bezos doesn't see it that way … and you probably won't either.

Today, Amazon is a small player in global retail. We represent a low single-digit percentage of the retail market, and there are much larger retailers in all countries where we operate. And that is largely because nearly 90% of retailers remain disconnected, in brick and mortar stores.

It should be fearful of brick and mortar all over the world, and be music to the ears of Amazon shareholders.

Leveraging on behalf of employees

Sometimes companies can act in their own interest and greatly help society at the same time. That was what happened when Amazon announced last year that it increased its minimum wage to $ 15 per hour.

It didn't hurt that the company was in the intersection of both the president, wishing the company to pay more in taxes, and the democratic hopeless Bernie Sanders, who criticized the pre-announcement payment of many employees.

But with a coward, Amazon not only praised critics and happy co-workers, it also argued for competitors who wanted to keep employees in this dense

Bezos did not conceal its competitive spirit in this regard.

Today, we challenge our biggest retailers (you know who you are!) To match our employee benefits and our $ 15 minimum wage. Does! Even better, go to $ 16 and throw the giant back at us.

It will be interesting to see if these competitors – namely, Walmart Target and a number of dollar stores – take him on that challenge.

Takeaway for investors

If it was a company that requires long-term vision to own, Amazon is. Of course, the last three years have been fantastic, as stocks have exploded. But before that, there were several periods of steep falls.

As long as Bezos keeps the C suite focused in the long run, your sights should also be set there. Be aware of the words in these letters than the daily price fluctuations, and you should be rewarded well.

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