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Bezos’s 1997 shareholder letter was a blueprint for Amazon’s success

Jeff Bezos between stacks of books in 1997
Paul Souders/Getty Images
Bezos in 1997.
  • Alexandra Ossola
By Alexandra Ossola

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Every year, Jeff Bezos, like the CEOs of many publicly traded companies, writes a letter to shareholders. Reading through those letters now, knowing what Amazon has become since its founding in 1994, can be a bit surreal—it’s almost hard to remember a time when Amazon hadn’t dominated dozens of industries, or was a corporate underdog, or needed to convince people that its aggressive, money-losing strategies would pay big dividends in the long term.

But there’s one letter that comes up every year: Bezos’s first shareholder letter, penned in 1997. It often comes attached to that year’s missive. Clearly, Bezos sees that 1997 letter as a glimpse into Amazon’s fundamental philosophy. Today, as Bezos has announced his plans to step down as Amazon CEO, it’s useful to revisit as a roadmap for what has made the company so wildly successful during his nearly 30 years at its helm, and as a way to see how far the company has come. We’ve annotated the letter, reprinted in its entirety, below.

To our shareholders: passed many milestones in 1997: by year-end, we had served more than 1.5 million customers, yielding 838% revenue growth to $147.8 million, and extended our market leadership despite aggressive competitive entry.

But this is Day 1 for the Internet 1 and, if we execute well, for Today, online commerce 2 saves customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the very process of discovery. 3 uses the Internet to create real value for its customers and, by doing so, hopes to create an enduring franchise, even in established and large markets.

This essentially means to be in startup mode—to encourage experiments and rally teams around a common cause. Bezos mentions this in several subsequent shareholder letters.
One small indication of what Amazon would change: e-commerce wasn't even a word yet.
Could Bezos have imagined how much Amazon's own recommendation algorithm would change the experience of retail? Probably.

We have a window of opportunity as larger players 4 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 sales.5 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 6 and crisp execution against established franchise leaders.

Early competitors primarily included big box booksellers like Barnes and Noble, before the "everything store" competed with all retailers.
Walmart, a "large player," still tops Amazon in overall annual sales, but for now Amazon has won the e-commerce war, making up 38% of all US online retail sales in 2019.
Bezos's unconventional business strategy: to make money, you've got to spend a LOT of it. Amazon famously lost money for 17 straight quarters. Clearly, those investments have paid off; in Q4 2020, for the first time, the company reached $100 billion in sales in a single quarter.

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.7 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.

You hear this about Bezos a lot: that his strategies are for long-term success, not the short term. Given the company's success, safe to say that's worked.

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 customer base, brand, and 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.8 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:

As Bezos mentions in future shareholder letters, the data in such decisions only gets you so far—he has relied a fair amount of his personal judgment to guide company decisions.

• We will continue to focus relentlessly on our customers.9

This is another element of Bezos's philosophy that comes up repeatedly over the years: his obsessive focus on the customer. The result is that Amazon set the bar high for customer service in e-commerce.

• 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 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 GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.10

In future letters, Bezos reiterates that he values cash flows over other typical metrics of a business's success, such as earnings per share or earnings growth.

• 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 incurring net losses.11

Translation for those lucky holders of Amazon stock in 1997: We're gonna lose money, but we'll try not to lose too much.

• 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.12

What does it mean to prioritize growth? Consistently undercutting your competitors on price to relentlessly gain market share.

• We will continue to focus on hiring and retaining versatile and talented employees, and continue to weight 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.13

Amazon stopped offering stock options for some workers in 2018 because the company claimed workers preferred the predictability of a higher minimum wage.

• 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 focus has been on offering our customers compelling value. We realized that the Web was, and still is, the World Wide Wait. 14 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 6 football fields), and presented it in a useful, easy-to-search, and easy-to-browse format in a store 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, 1-ClickSM shopping, and vastly more reviews, content, browsing options, and recommendation features. We dramatically lowered prices, further increasing customer value. Word of mouth remains the most powerful 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 the market leader in online bookselling.

This expression, no longer relevant to the millions of Amazon customers whose internet connections are now lightning fast and always on, refers to the slow pace of all things online—logging on, loading pages, etc. But it's important to remember that, for the billions of people worldwide who have tenuous connections to the internet, the "World Wide Wait" is still a reality.

By many measures, came a long way in 1997:

• Sales grew from $15.7 million in 1996 to $147.8 million—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 Metrix, our Web site 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, @Home, and Prodigy.


During 1997, we worked hard to expand our business infrastructure to support these greatly increased traffic, sales, and service levels:

•’s employee base grew from 158 to 614, and we significantly strengthened our management team. 15

As of Oct. 2020, Amazon had over 1 million employees.

• 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, hard-working group, and I take great pride in being a part of this team. Setting the bar high in our approach to hiring has been, and will continue to be, the single most important element of’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 you can’t choose two out of three”) 16, but we are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren’t meant to be easy. We are incredibly fortunate to have this group of dedicated employees whose sacrifices and passion build

This quote is a good encapsulation of Bezos's management strategy. He has a reputation as not a particularly nice boss and has cultivated a corporate culture that some have called "notoriously confrontational."

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 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. 17 We also believe there are significant opportunities to better serve our customers overseas, 18 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.

A non-exhaustive list of products that Amazon has added since 1997: Kindle e-reader, Kindle Fire tablet, Echo smart speaker, Fire TV, a studio film arm, Amazon Gaming Studio, Twitch gaming streaming platform, Amazon Fresh home grocery delivery.
Outside the US, Amazon now has fulfillment centers (warehouses) in Mexico, Canada, the Czech Republic, France, Germany, Italy, Poland, Slovakia, Spain, UK, China, Japan, India, Australia, and Brazil. But it has not always lived up to its global ambitions.

We now know vastly more about online commerce than when 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 will face to make our long-term vision for a reality are several: aggressive, capable, well-funded competition; considerable growth challenges and execution risk; the risks 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 bookselling, 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. 19 We feel good about what we’ve done, and even more excited about what we want to do.

This was a very accurate prediction.

1997 was indeed an incredible year. We at 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.