Bezos’s 2012 Shareholder Letter: Internally Driven Services Keep Improving

#BezosShareholderLetter2012 The first letter, from 1997, was posted on December 10, 2021. Hurry back and catch up! XD In this 2012 letter, Bezos discusses “internal motivation” and “external motivation.” What drives you and your company forward? It’s All About The Long Term; Amazon is driven by continually delighting customers rather than defeating competitors. To our shareholders: Regular readers of our shareholder letters will know that Amazon is driven by continually delighting customers rather than defeating competitors. We do not try to decide which approach maximizes business success. Each has advantages and disadvantages, and many outstanding companies excel at repeatedly beating their rivals. We do pay attention to competitors, but more to draw inspiration from them. For us, customer focus is deeply embedded in our culture. One subtle advantage of being customer-driven is that it encourages us to act proactively. In the areas where we do our best work, we do not need outside pressure. We genuinely want to improve our services and add useful features. We keep lowering prices and increasing the value we create for customers. We keep innovating, rather than waiting until we have no choice. Our investments are driven by customers, not competitors. We believe this earns customers’ trust and pushes us to improve their experience. Above all, it keeps us from easing off even where we are already doing our best work. “Thank you. Whenever I open Amazon’s homepage and see a white paper appear, I know you have added more for Prime members. I originally just wanted free shipping, but now I have films, TV shows, and books too… You keep adding more without charging more. Well done!” We now have over 15 million items eligible for Prime, fifteen times as many as when we launched in 2005. Prime Instant Video’s selection has grown twofold in a year, and we now have more than 38,000 movies and TV episodes. The Kindle Owners’ Lending Library has over 300,000 books, including our investment of millions of dollars to include the entire Harry Potter series. We did not “have to” make these improvements to Prime. We chose to do so proactively. Another related long-term investment is Fulfillment by Amazon (FBA). It lets third-party sellers use Amazon’s warehousing and logistics network, making their products eligible for Prime. The two programs reinforce each other: sellers increase their sales, and Prime customers gain more choice. We built an automated system to detect when the customer experience falls below the standard we want to provide. When that happens, the system automatically gives customers a refund. An industry observer recently received an automated email while watching a movie on Amazon: “We noticed that your viewing of Casablanca was not clear and smooth enough. We are very sorry and have decided to refund you US$2.99. We hope to see you use our service again.” He was surprised by the automated email and wrote an article about the experience. When you preorder a product on Amazon, we guarantee the lowest price through its release date. “I just received a US$5 refund because of the preorder price-protection policy… What a great way to do business. Thank you for your honesty!” Exactly. Many customers do not have time to follow price changes, so we do it for them. If a lower price appears, we refund the difference automatically. Taking the initiative costs us more, but it also surprises and delights customers and earns their trust. Authors are customers too. Amazon Publishing has announced that it will pay royalties monthly. The industry generally pays twice a year and has done so for a long time. Yet when we interviewed authors, we learned that being paid in so few installments was deeply frustrating. Imagine receiving your salary only twice a year. No outside pressure forced us to pay more often. We chose to do it proactively. Incidentally, although this “research” was arduous, I am delighted to report that I recently saw lots of people using Kindles on a Florida beach. Ha! 😄 There are now five Kindle generations, and I saw pretty much every one except the first. Our aim is to sell high-quality hardware at rock-bottom prices. We want customers to pay when they use our products rather than when they buy them. We believe this fits our customer-first principle better. We do not need customers chasing our latest models. We are still delighted when they use a four-year-old Kindle. I could keep going: Kindle Fire’s FreeTime, our customer-service Andon Cord, Amazon MP3’s AutoRip, and so on. But the final internally motivated initiative we have to discuss is Amazon Web Services (AWS). In 2012, AWS announced 159 new features and services. Compared with when we launched seven years earlier, we have reduced AWS prices by a factor of 27, enhanced enterprise support, and added new tools to help customers increase sales. AWS Trusted Advisor monitors customers’ configurations, compares them with the system’s best configurations, and tells customers where they can improve performance, enhance security, or save money. Yes, we proactively tell customers they are paying too much. Over the past 90 days, customers have saved millions of dollars using Trusted Advisor, and the service has only just launched. We did all this when AWS was already the clear market leader. You might think we no longer faced any outside pressure, but our internal motivation pushes us to create features that make customers exclaim in delight. That same internal drive keeps our innovation moving. Our investments in Prime, AWS, Kindle, digital media, and the customer experience lead some people to think we are too generous, insufficiently attentive to investors, or even operating without a profit motive. “As far as I can see, Amazon is a charitable organization made up of elements of commercial companies, doing everything for customers,” one observer writes. I disagree. Trying to release improvements “just in time,” at carefully chosen moments, is being too clever. In a world changing this quickly, it is too risky. More fundamentally, I believe long-term thinking closes the loop: delighting customers proactively earns trust; trust brings more repeat business and new customers, even in entirely new areas. Over the long run, shareholders’ interests and customers’ interests are aligned. As I write this, our share price has been doing reasonably well. But we keep reminding ourselves of Benjamin Graham’s observation, which I often quote at company meetings: “In the short run, the market is a voting machine; in the long run, it is a weighing machine.” We do not celebrate a 10% share-price increase as if we had achieved a great triumph. A 10% rise does not make us smarter, and a 10% fall does not make us more foolish. We want to step onto the scales! We keep working to build ourselves into a big, heavy company! Although I am proud of our innovations, I know we will keep making mistakes. Some will hurt us; others will be made up for by our capable, hardworking team. Our desire to push forward will keep us willing to explore narrow paths. We may find a dead end, but with some luck, a path may lead us onto a broad avenue. Proud and grateful. The letter is attached. Our original commitment remains: Day 1. Jeffrey P. Bezos (Chinese translation by Vinchent) ——Verification note—— Source: Amazon’s 2012 shareholder letter, an official public document. The Chinese translation was reposted from Dedao App user Vinchent, as credited in the original post. Verification: Compared with the official original in Amazon’s official shareholder-letter collection, cross-checked against SEC documents/official PDFs. Selected major figures and facts were consistent; the entire text was not compared word for word. Correction (one difference between the Chinese translation and the original): • For Prime Video’s “grown twofold,” the original says “tripled,” meaning an increase to three times the previous selection (38,000 titles).