Amazon CEO Andy Jassy on Thursday printed his first annual shareholder letter since taking up the helm from founder Jeff Bezos final yr.
Jassy wrote concerning the huge expansion Amazon skilled all over the coronavirus pandemic, in particular in its core retail trade, as other people lower their journeys to the shop and relied at the e-commerce large for each important and non-essential items.
“We discovered the similar of 3 years’ forecasted expansion in about 15 months,” stated Jassy, who took over the position of CEO from Bezos in July 2021. Bezos transitioned into the position of government chairman of Amazon’s board.
As Amazon reported document income all over the pandemic, it additionally confronted logistics and price demanding situations whilst looking to stay alongside of call for, Jassy stated. Amazon briefly scaled up its warehouse community as a way to activity extra orders.
“We spent Amazon’s first 25 years development an overly huge success community, after which needed to double it within the final 24 months to fulfill buyer call for,” Jassy stated.
On best of logistical demanding situations, Amazon additionally handled the consequences of a tightening exertions marketplace, which made it tricky for the corporate to transport stock as successfully as it will ahead of.
Provide chain constraints additionally added every other difficult layer, as ocean, air and trucking capability changed into constrained and container costs shot up.
“It isn’t customary for an organization of any measurement as a way to reply to one thing as discontinuous and unpredictable as this pandemic grew to become out to be,” Jassy stated. “What’s it about Amazon that made it conceivable for us to take action? It is because we were not ranging from a status get started.”
Expensive shareholders:
Over the last 25 years at Amazon, I have had the chance to write down many narratives, emails, letters, and keynotes for workers, shoppers, and companions. However, that is the primary time I have had the distinction of writing our annual shareholder letter as CEO of Amazon. Jeff set the bar excessive on those letters, and I can attempt to stay them price studying.
When the pandemic began in early 2020, few other people idea it could be as expansive or long-running as it is been. No matter position Amazon performed on this planet as much as that time changed into additional magnified as maximum bodily venues close down for lengthy classes of time and other people spent their days at house. This supposed that masses of tens of millions of other people depended on Amazon for PPE, meals, clothes, and quite a lot of different pieces that helped them navigate this remarkable time. Companies and governments additionally needed to shift, nearly in a single day, from running with colleagues and era on-premises to running remotely. AWS performed a significant position in enabling this trade continuity. Whether or not corporations noticed ordinary call for spikes, or call for diminish briefly with diminished exterior intake, the cloud’s elasticity to scale capability up and down briefly, in addition to AWS’s strangely vast capability helped tens of millions of businesses regulate to those tricky instances.
Our AWS and Client companies have had other call for trajectories all over the pandemic. Within the first yr of the pandemic, AWS income persevered to develop at a speedy clip—30% yr over yr (“YoY”) in 2020 on a $35 billion annual income base in 2019—however slower than the 37% YoY expansion in 2019. This used to be due partially to the uncertainty and slowing call for that such a lot of companies encountered, but in addition partially to our serving to corporations optimize their AWS footprint to economize. Similtaneously, corporations had been stepping again and figuring out what they sought after to modify popping out of the pandemic. Many concluded that they did not need to proceed managing their era infrastructure themselves, and made the verdict to speed up their transfer to the cloud. This shift by way of such a lot of corporations (together with the financial system recuperating) helped re-accelerate AWS’s income expansion to 37% YoY in 2021.
Conversely, our Client income grew dramatically in 2020. In 2020, Amazon’s North The usa and Global Client income grew 39% YoY at the very huge 2019 income base of $245 billion; and, this ordinary expansion prolonged into 2021 with income expanding 43% YoY in Q1 2021. Those are astounding numbers. We discovered the similar of 3 years’ forecasted expansion in about 15 months.
As the arena spread out once more beginning in overdue Q2 2021, and extra other people ventured out to devour, store, and commute, shopper spending returned to being unfold over many extra entities. We were not positive what to anticipate in 2021, however the truth that we persevered to develop at double digit charges (with a two-year Client compounded annual expansion price of 29%) used to be encouraging as shoppers liked the position Amazon performed for them all over the pandemic, and began the usage of Amazon for a bigger quantity in their family purchases.
This expansion additionally created momentary logistics and price demanding situations. We spent Amazon’s first 25 years development an overly huge success community, after which needed to double it within the final 24 months to fulfill buyer call for. As we had been bringing this new capability on-line, the exertions marketplace tightened significantly, making it difficult each to obtain all the stock our distributors and dealers sought after to ship us and to position that stock as as regards to shoppers as we generally do. Mixed with ocean, air, and trucking capability changing into scarcer and costlier, this created additional transportation and productiveness prices. Provide chains had been disrupted in tactics none folks had noticed up to now. We was hoping that the foremost affect from COVID-19 would recede as 2021 drew to a detailed, however then omicron reared its head in December, which had international ramifications, together with impacting other people’s skill to paintings. After which in overdue February, with Russia’s invasion of Ukraine, gasoline prices and inflation changed into larger problems with which to contend.
So, 2021 used to be a loopy and unpredictable yr, proceeding a development from 2020. However, I am pleased with the implausible dedication and energy from our staff in every single place the arena. I am not positive any folks would have got throughout the pandemic the similar approach with out the willpower and ordinary efforts proven by way of our groups all over this era, and I am endlessly thankful.
It isn’t customary for an organization of any measurement as a way to reply to one thing as discontinuous and unpredictable as this pandemic grew to become out to be. What’s it about Amazon that made it conceivable for us to take action? It is because we were not ranging from a status get started. We were iterating on and remaking our success functions for just about 20 years. In each trade we pursue, we are repeatedly experimenting and inventing. We are divinely discontented with buyer studies, whether or not they are our personal or now not. We consider those buyer studies can all the time be higher, and we try to make shoppers’ lives higher and more straightforward each day. The wonderful thing about this challenge is that you simply by no means run out of runway; shoppers all the time need higher, and our task is each to hear their comments and to believe what else is conceivable and invent on their behalf.
Folks incessantly think that the game-changing innovations they respect simply come out of any individual’s head, a gentle bulb is going off, a workforce executes to that concept, and presto—you might have a brand new invention that is a breakaway luck for a very long time. That is infrequently, if ever, the way it occurs. One of the vital lesser recognized information about leading edge corporations like Amazon is that they’re relentlessly debating, re-defining, tinkering, iterating, and experimenting to take the seed of a giant thought and make it into one thing that resonates with shoppers and meaningfully adjustments their buyer enjoy over a protracted time frame.
Let me provide you with some Amazon examples.
Our Success Community: Going again to the pandemic, there is not any approach we may have set to work on our success community in March 2020 and happy the rest as regards to what our shoppers wanted. We might been innovating in our success community for two decades, repeatedly looking to shorten the time to get pieces to shoppers. Within the early 2000s, it took us a median of 18 hours to get an merchandise via our success facilities and at the proper truck for cargo. Now, it takes us two. To ship as reliably and cost-effectively as we need, and to serve Amazon High contributors anticipating shipments in a few days, we spent years development out an expansive set of success facilities, a considerable logistics and transportation capacity, and reconfigured how we did just about the entirety in our amenities. For point of view, in 2004, we had seven success facilities within the U.S. and 4 in different portions of the arena, and we hadn’t but added supply stations, which attach our success and sortation facilities to the last-mile supply vehicles you spot using round your community. Rapid ahead to the tip of 2021, we had 253 success facilities, 110 sortation facilities, and 467 supply stations in North The usa, with an extra 157 success facilities, 58 sortation facilities, and 588 supply stations around the globe. Our supply community grew to greater than 260,000 drivers international, and our Amazon Air shipment fleet has greater than 100 plane. This has represented a capital funding of over $100 billion and numerous iterations and small activity enhancements by way of over one million Amazonians within the final decade and a part.
Satirically, simply ahead of COVID began, we might made the verdict to speculate billions of incremental bucks over a number of years to ship more and more High shipments in in the future. This initiative used to be slowed by way of the demanding situations of the pandemic, however we’ve got since resumed our center of attention right here. Turning in a great deal of shipments in in the future is tricky (particularly around the tens of millions of things that we provide) and first of all pricey as we construct out the infrastructure to scale this successfully. However, we consider our over 200 million High shoppers, who will inform you very obviously that quicker is nearly all the time higher, will love this. So, this capacity to send tens of millions of things inside of a pair days (and an increasing number of in the future) used to be now not from one aha second and now not evolved in a yr or two. It is been hard earned by way of striking ourselves within the footwear of our shoppers, realizing what they sought after, organizing Amazonians to paintings in combination to invent higher answers, and making an investment a considerable amount of monetary and other people assets over two decades (incessantly nicely prematurely of when it could payout). This sort of iterative innovation is rarely completed and has periodic peaks in funding years, however ends up in higher long-term buyer studies, buyer loyalty, and returns for our shareholders.
AWS: As we had been defining AWS and dealing backwards at the products and services we idea shoppers sought after, we stored triggering one of the vital largest tensions in product building—the place to attract the road on capability in V1. One early assembly specifically—for our core compute provider referred to as Elastic Compute Cloud (“EC2”)—used to be scheduled for an hour, and took 3, as we animatedly debated whether or not shall we release a compute provider with out an accompanying chronic block garage spouse (a type of community connected garage). Everyone agreed that having a chronic block retailer used to be essential to an entire compute provider; on the other hand, to have one able would take an additional yr. The query changed into may just we provide shoppers an invaluable provider the place they might get significant worth ahead of we had all of the options we idea they sought after? We made up our minds that the preliminary release of EC2 might be feature-poor if we additionally arranged ourselves to hear shoppers and iterate briefly. This way works nicely in case you certainly iterate briefly; however, is disastrous if you’ll’t. We introduced EC2 in 2006 with one example measurement, in a single knowledge middle, in a single area of the arena, with Linux running device circumstances solely (no Home windows), with out tracking, load balancing, auto-scaling, or sure, chronic garage. EC2 used to be an preliminary luck, however nowhere close to the multi-billion-dollar provider it is transform till we added the lacking functions indexed above, after which some.
Within the early days of AWS, other people occasionally requested us why compute would not simply be an undifferentiated commodity. However, there is much more to compute than only a server. Shoppers need quite a lot of flavors of compute (e.g. server configurations optimized for garage, reminiscence, high-performance compute, graphics rendering, device finding out), a couple of shape components (e.g. mounted example sizes, moveable boxes, serverless purposes), quite a lot of sizes and optimizations of chronic garage, and a slew of networking functions. Then, there is the CPU chip that runs for your compute. For a few years, the business had used Intel or AMDx86 processors. We’ve got essential partnerships with those corporations, however discovered that if we needed to push payment and function additional (as shoppers asked), we might need to broaden our personal chips, too. Our first generalized chip used to be Graviton, which we introduced in 2018. This helped a subset of shopper workloads run extra cost-effectively than prior choices. However, it wasn’t till 2020, after taking the learnings from Graviton and innovating on a brand new chip, that we had one thing exceptional with our Graviton2 chip, which gives as much as 40% higher price-performance than the related newest technology x86 processors. Consider how a lot of an affect 40% growth on compute is. Compute is used for each little bit of era. That is an enormous deal for purchasers. And, whilst Graviton2 has been an important luck to this point (48 of the highest 50 AWS EC2 shoppers have already followed it), the AWS Chips workforce used to be already finding out from what shoppers stated might be higher, and introduced Graviton3 this previous December (providing a 25% growth on best of Graviton2’s relative positive factors). The record of what we’ve got invented and delivered for purchasers in EC2 (and AWS normally) is lovely mind-boggling, and this iterative option to innovation has now not solely given shoppers a lot more capability in AWS than they are able to to find any place else (which is an important differentiator), but in addition allowed us to reach on the a lot more game-changing providing that AWS is lately.
Gadgets: Our first foray into units used to be the Kindle, launched in 2007. It used to be now not probably the most subtle business design (it used to be creamy white in colour and the corners had been uncomfortable for some other people to carry), however progressive as it introduced shoppers the facility to obtain any of over 90,000 books (now tens of millions) in 60 seconds—and we were given higher and quicker at development horny designs. In a while thereafter, we introduced a pill, after which a telephone (with the distinguishing function of getting front-facing cameras and a gyroscope to provide shoppers a dynamic point of view together with numerous 3-d studies). The telephone used to be unsuccessful, and even though we decided we had been more than likely too overdue to this social gathering and directed those assets in other places, we employed some improbable long-term developers and discovered precious classes from this failure that experience served us nicely in units like Echo and FireTV.
After I bring to mind the primary Echo tool—and what Alexa may just do for purchasers at that time—it used to be noteworthy, but such a lot much less succesful than what is conceivable lately. As of late, there are masses of tens of millions of Alexa-enabled units in the market (in houses, workplaces, vehicles, lodge rooms, Amazon Echo units, and third-party producer units); you’ll pay attention to song—or watch movies now; you’ll keep an eye on your lighting and residential automation; you’ll create routines like “Get started My Day” the place Alexa tells you the elements, your estimated trip time in keeping with present site visitors, then performs the scoop; you’ll simply order retail pieces on Amazon; you’ll get common or custom designed information, updates on wearing occasions and linked stats—and we are nonetheless rather early with admire to what Alexa and Alexa-related units will do for purchasers. Our purpose is for Alexa to be the arena’s maximum useful and resourceful non-public assistant, who makes other people’s lives meaningfully more straightforward and higher. We’ve got much more inventing and iterating to move, however shoppers proceed to suggest that we are at the proper trail. We’ve got a number of different units at various levels of evolution (e.g. Ring and Blink give you the main virtual house safety answers, Astro is a brand spanking new house robotic that we simply introduced in overdue 2021), however it is secure to mention that all of our units, whether or not you might be speaking about Kindle, FireTV, Alexa/Echo, Ring, Blink, or Astro is an invention-in-process with much more coming that may stay bettering shoppers’ lives.
High Video: We began in 2006 with an providing referred to as Amazon Unbox the place shoppers may just obtain a few thousand motion pictures from primary studios. This made sense as bandwidth used to be slower the ones days (it could take an hour to obtain a video). However, as bandwidth were given a lot quicker to other people’s houses and cellular units, together with the arrival of attached TVs, streaming used to be going to be a significantly better buyer answer, and we targeted our efforts on streaming. In 2011, we began providing over 5,000 streaming motion pictures and presentations as a part of shoppers’ Amazon High subscriptions. To begin with, all of our content material used to be produced by way of different studios and leisure corporations. Those offers had been pricey, country-specific, and solely to be had to us for a restricted duration; so, to extend our choices, we began growing our personal authentic presentations. Our early efforts incorporated short-lived presentations like Alpha Space and Betas, ahead of we had our first award-winning collection in Clear, and ultimately created multi-year franchises in The Marvelous Mrs. Maisel, The Boys, Bosch, and Jack Ryan. Alongside the way in which, we’ve got discovered so much about generating compelling leisure with memorable moments and the usage of device finding out and different ingenious era to supply a superior-quality streaming enjoy (with helpful, related knowledge about actors, TV presentations, motion pictures, song, or sports activities stats a click on away in our distinctive X-Ray function). You may have noticed a few of this in motion in our fresh new hit collection, Reacher, and you’ll be able to expectantly see it in our upcoming Lord of the Rings collection release (coming Exertions Day 2022). We additionally be expecting that you’ll be able to see this iterative invention after we release Thursday Night time Soccer, the NFL’s first weekly, top time, streaming-only broadcast, airing solely on High Video beginning in September 2022. Our settlement with the NFL is for 11 years, and we will be able to paintings relentlessly over the following a number of years to reinvent the NFL viewing enjoy for soccer fanatics.
This monitor document of widespread invention isn’t just why extra sports activities entities are opting for to paintings with High Video, but in addition why such a lot of huge leisure corporations have transform High Video Channels companions. Channels is a program that permits leisure corporations to leverage High Video’s distinctive era and viewing enjoy, in addition to its very huge member base to provide per 30 days subscriptions to their content material. Firms like Warner Bros. Discovery, Paramount, Starz, Corus Leisure, and Globo have discovered that they are using really extensive incremental club and higher buyer enjoy via Channels. Whilst there may be such a lot growth in High Video from the place we began, now we have extra invention in entrance folks within the subsequent 15 years than the final 15—and our workforce is passionately dedicated to offering shoppers with probably the most expansive number of compelling content material any place on this planet.
This similar type of iterative invention can also be carried out to efforts supporting other people and communities. Closing summer season, we added two new Management Rules: Attempt to be Earth’s Best possible Employer and Good fortune and Scale Convey Extensive Duty. Those ideas had been all the time implicit at Amazon, however specific Management Rules lend a hand us ask ourselves—and empower extra Amazonians in any respect ranges to invite—whether or not we are residing as much as those ideas.
For instance, greater than one million Amazonians paintings in our success community. In 2018, we championed the $15 minimal salary (which is greater than double the federal minimal salary), however have not stopped there. We persevered to extend reimbursement such that our reasonable beginning hourly wage is these days over $18. In conjunction with this reimbursement, we provide very powerful advantages, together with complete medical health insurance, a 401K plan, as much as 20 weeks of parental go away, and entire tuition protection for buddies who need to get a school schooling (whether or not they stay with us or now not). We are not as regards to being completed in how we give a boost to the lives of our staff. We have researched and created an inventory of what we consider are the highest 100 worker enjoy ache issues and are systematically fixing them. We are additionally enthusiastic about additional bettering protection in our success community, with a focal point on lowering lines, sprains, falls, and repetitive pressure accidents. Our harm charges are occasionally misunderstood. We’ve got operations jobs that are compatible each the “warehousing” and “courier and supply” classes. Within the final U.S. public numbers, our recordable incident charges had been a little bit upper than the typical of our warehousing friends (6.4 vs. 5.5), and a little bit not up to the typical of our courier and supply friends (7.6 vs. 9.1). This makes us about reasonable relative to friends, however we do not search to be reasonable. We need to be highest at school. After I first began in my new position, I spent important time in our success facilities and with our protection workforce, and was hoping there may well be a silver bullet that might alternate the numbers briefly. I did not to find that. At our scale (we employed over 300,000 other people in 2021 on my own, a lot of whom had been new to this kind of paintings and wanted coaching), it takes rigorous research, considerate problem-solving, and a willingness to invent to get to the place you need. We have been dissecting each activity trail to discern how we will be able to additional give a boost to. We’ve got a number of methods in flight (e.g. rotational methods that lend a hand staff steer clear of spending an excessive amount of time doing the similar repetitive motions, wearables that recommended staff when they are transferring in a perilous approach, stepped forward footwear to supply higher toe coverage, coaching methods on frame mechanics, wellness, and protection practices). However, we nonetheless have far to move, and we will way it like we do different buyer studies—we will continue to learn, inventing, and iterating till now we have extra transformational effects. We would possibly not be happy till we do.
In a similar way, at our scale, now we have an important carbon footprint. It is a giant a part of why we created The Local weather Pledge a couple of years in the past (a pledge to be net-zero carbon by way of 2040, ten years forward of the Paris Settlement). We are making important growth in this effort (we are dedicated to powering our operations with 100% renewable power by way of 2025—5 years forward of our authentic goal of 2030, now we have ordered over 100,000 electrical vehicles to ship applications, and feature over 300 corporations who have joined us in The Local weather Pledge). However, now we have a special problem than maximum corporations given the range and depth of our operations (together with transport billions of applications in line with yr). We are dedicated to the problem, however it’ll take relentless invention.
We are also looking to build up the quantity of reasonably priced housing within the communities through which now we have a big presence. Our greater than $2 billion Housing Fairness Fund that we began a yr in the past has already allotted $1.2 billion towards reasonably priced housing projects within the spaces round Washington state’s Puget Sound area, Arlington (Virginia), and Nashville (Tennessee).
A last fast instance is Kuiper, our low Earth orbit satellite tv for pc community that we are spending over $10 billion to construct within the subsequent a number of years. Kuiper will serve shoppers with minimum to no mounted broadband connectivity, replacing get entry to to knowledge and assets for lots of communities (analysts estimate roughly 300-400 million shoppers globally are on this class). We are positive that there’s a lovely excellent trade style for us too, however we will see—and it is a actual sport changer for underserved households and companies that may spread over a few years as we stay evolving its functions.
This sort of iterative innovation is pervasive throughout each workforce at Amazon. I may have given related examples in Promoting, Grocery, Gaming, Amazon Song, Amazon Care (our telemedicine providing), or Pharmacy, to call a couple of. All of those tales are nonetheless being written as we hastily experiment, be informed, and proceed to take a look at to make our buyer enjoy higher each day.
If this way sounds interesting, a herbal query is what is required to get excellent at it? It is more straightforward stated than completed, however listed here are some elements that experience helped us:
1/ Rent the Proper Developers: We disproportionately index in hiring developers. We bring to mind developers as individuals who love to invent, who take a look at buyer studies, dissect what does not paintings nicely about them, and search to reinvent them. We would like individuals who stay asking why cannot it’s completed? We would like individuals who love to experiment and tinker, and who understand release is the beginning line, now not the end line.
2/ Prepare Developers into Groups That Are as Separable and Self reliant as Conceivable: It is onerous for groups to be deep in what shoppers care about in a couple of spaces. It is usually onerous to spend sufficient time at the new projects when there is useful resource competition with the extra mature companies; the surer bets normally win out. Unmarried-threaded groups will know their shoppers’ wishes higher, spend all their waking paintings hours inventing for them, and broaden context and pace to stay iterating briefly.
3/ Give Groups the Proper Equipment and Permission to Transfer Rapid: Pace isn’t pre-ordained. It is a management selection. It has trade-offs, however you’ll’t get up in the future and get started transferring speedy. It calls for having the best equipment to experiment and construct speedy (a significant a part of why we began AWS), permitting groups to make two-way door selections themselves, and atmosphere an expectation that velocity issues. And, it does. Pace is disproportionally essential to each trade at each degree of its evolution. Those who transfer slower than their aggressive friends fall away over the years.
4/ You Want Blind Religion, However No False Hope: It is a lyric from considered one of my favourite Foo Combatants songs (“Congregation”). While you invent, you get a hold of new concepts that individuals will reject as a result of they have not been completed ahead of (that is the place the blind religion is available in), however additionally it is essential to step again and you should definitely have a viable plan that’ll resonate with shoppers (steer clear of false hope). We are fortunate that we have got developers who problem each and every different, comments loops that give us get entry to to buyer comments, and a product building technique of running backwards from the buyer the place having to write down a Press Unencumber (to flesh out the buyer advantages) and a Continuously Requested Questions file (to element how we might construct it) is helping us have blind religion with out false hope (no less than normally).
5/ Outline a Minimal Loveable Product (MLP), and Be Prepared to Iterate Rapid: Working out the place to attract the road for release is among the maximum tricky selections groups should make. Ceaselessly, groups wait too lengthy, and demand on too many bells and whistles, ahead of launching. And, they omit the primary mover merit or alternative to construct mindshare in fast-moving marketplace segments ahead of well-executing friends get too a long way forward. The release product should be excellent sufficient that you simply consider it will be cherished from the get-go (why we name it a “Minimal Loveable Product” vs. a “Minimal Viable Product”), however in more moderen marketplace segments, groups are incessantly at an advantage getting this MLP to shoppers and iterating briefly thereafter.
6/ Undertake a Lengthy-term Orientation: We are occasionally criticized at Amazon for now not shutting a lot down. It is true that we have got an extended tolerance for our investments than maximum corporations. However, we all know that transformational invention takes a couple of years, and if you are making giant bets that you simply consider may just considerably alternate buyer enjoy (and your corporate), you need to be in it for the long-haul or you’ll be able to surrender too briefly.
7/ Brace Your self for Failure: When you invent so much, you’re going to fail extra incessantly than you want. No person likes this phase, nevertheless it comes with the territory. When it is transparent that we’ve got introduced one thing that would possibly not paintings, we make certain we’ve got discovered from what did not cross nicely, and protected nice touchdown puts for workforce contributors who delivered nicely—or your highest other people will hesitate to paintings on new projects.
Albert Einstein is occasionally credited with describing compound pastime because the 8th marvel of the arena (“He who understands it, earns it. He who does not, will pay it”). We bring to mind iterative innovation in a lot the similar approach. Iterative innovation creates magic for purchasers. Repeatedly inventing and bettering merchandise for purchasers has a compounding impact at the buyer enjoy, and in activate a trade’s possibilities.
Time is your pal if you end up compounding positive factors. Amazon is a huge corporate with some huge companies, however it is nonetheless early days for us. We can proceed to be rebel—inventing in companies that we are in, in new companies that we’ve got but to release, and in new concepts that we have not even imagined but. It stays Day 1.
Sincerely,
Andy Jassy
President and Leader Govt Officer
Amazon.com, Inc.
P.S. As now we have all the time completed, our authentic 1997 Shareholder Letter follows. What is written there may be as true lately because it used to be in 1997.
