There's no question that Amazon.com (AMZN 1.30%) has become a force to be reckoned with, as the world's online sales leader. That said, the company cannot afford to rest on its laurels -- so says Amazon's CEO Jeff Bezos in the company's annual letter to shareowners.
While Bezos spoke at length about high standards and the ever-increasing expectations of customers, he also revealed a variety of milestones the company achieved last year. Here are a few important takeaways from his yearly missive.
Prime is bigger than many people imagined. Image source: Amazon.
Prime numbers
The most intriguing revelation answered a question that investors have long wondered about -- how many Amazon customers are members of its Prime loyalty program -- and now we know. Bezos said that "13 years post-launch, we have exceeded 100 million paid Prime members globally." These customers, who pay about $99 per year for perks like free shipping and streaming video, are the company's most prized customers.
Late last year, Consumer Intelligence Research Partners (CIRP) estimated that Amazon had 90 million Prime members in the U.S. This is significant because these customers tend to be the most engaged shoppers, spending on average about $1,300, compared to $700 per year for non-member customers, according to CIRP.
If those estimates are anywhere near correct, the implications are astounding. With 90 million U.S. Prime members spending $325 per quarter ($1,300 / four quarters), it would have generated $29.25 billion, 70% of Amazon's $41.3 billion in e-commerce sales for the fourth quarter of 2017. This shows why Amazon is so keen to increase the ranks of its Prime customers.
It is important to note that this is merely fun with numbers, and any estimate is a ballpark at best. Amazon is only now confirming its global Prime member numbers, and has not released a breakdown by country or any specific customer spending metrics.
Divinely discontent
In describing the state of customer expectations, Bezos described them as being "divinely discontent" saying that "their expectations are never static -- they go up." This theme is in keeping with statements made last year, when he said "customers are always beautifully, wonderfully dissatisfied."
This simple acknowledgement lies at the heart of Amazon's ongoing success. The company has always been relentlessly focused on customer service, rather than worrying about the competition. This is clearly laid out in its goal to be "Earth's most customer-centric company." By consistently raising the bar, Amazon has customers who are increasingly loyal, which leads to even greater sales.
Customers love the Echo. Image source: Amazon.
Customers continue to embrace Alexa
Bezos touted the company's Alexa-enabled devices, saying they were "among the best-selling items across all of Amazon," a refrain heard during last year's holiday season. Alexa has more than 30,000 skills and can control more than 4,000 smart home devices from 1,200 unique brands. Bezos boasted that Alexa continues to get smarter every day, saying, "We've improved Alexa's spoken language understanding by more than 25% over the last 12 months."
We still don't know how many Alexa-controlled products have been purchased, but Bezos said, "Customers bought tens of millions of Echo devices."
This is important to investors, as customers who use Alexa's voice-controlled products are believed to spend more than even Prime members. The average annual spending by Echo owners is estimated to be $1,700, 66% more than average, and even higher than the $1,300 spent by Prime members, according to CIRP.
The world is its oyster
Amazon became the global e-commerce leader by relentlessly focusing on the customer. Innovations like Prime and Alexa are only increasing the company's competitive advantage over all competition, large and small.
Online sales in international markets currently make up just 32% of Amazon's revenue. As adoption of Prime grows worldwide and the company expands its voice services to new countries, expect those numbers to skyrocket. It won't be long before the majority of Amazon's sales come from abroad -- and the company will be much bigger than it is today.
