Amazon.com Inc. didn’t achieve record profits in 2007 by virtue of just being the biggest kid on the block.
Rather Amazon grew its annual net income by 150% in 2007 to $476 million and sales by 38% to $14.8 billion by finding new and better ways to sell even more merchandise to customers.
A few of the 2007 highlights: the introduction of Kindle, a wireless portable reading device, a new online grocery business and Amazon MP3, an online digital rights management-free music store.
Expansion is nothing new to Amazon. But the bigger the company gets the more expert it becomes in targeting specific niches and merchandising categories. “Our focus has always been to be extremely competitive and to get really operationally great at that, so that our pricing is very, very sharp and we are always giving customers the best possible deal,” CEO Jeff Bezos told analysts on the company’s fourth quarter earnings call.
In 2007, Amazon spent 6% of total sales -- $818 million -- on new content and technology, compared with 6% of sales, or $662 million, in 2006. Spending on fulfillment grew to 9% of total sales -- $1.3 billion -- from $937 million, also 9% of sales, in 2006. Amazon also spent $344 million on marketing in 2007, or 2% of sales, up from $263 million -- 2% of sales in 2006. In 2007, Amazon’s North American sales, which include Canada and the U.S., totaled $8.1 billion, an increase of 37.3% from 2006 North American sales of $5.9 billion. International sales rose year-over-year to $6.7 billion compared with $4.8 billion in 2006, an increase of 39.6%.
“We are going to make sure that we focus on the customer experience, which includes making sure that we have great prices across all of our categories and geographies,” Amazon chief financial officer Thomas J. Szkutak told analysts. “We are going to continue to make sure that we have increased selection, have great in-stock levels.”
Amazon, No. 1 in the Internet Retailer Top 500 Guide, expects net sales in 2008 to range from $18.75 billion to $19.75 billion.
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