There's no mention of Amazon Fresh or other Amazon physical retail initiatives in Jeff Bezos' 2021 shareholder letter, but he does describe physical shopping as a time-consuming process.
Anyone looking for insights into Amazon’s food retailing strategy will be left wanting after reading the latest shareholder letter from Amazon founder and CEO Jeff Bezos. Such information would be a reasonable expectation of an investor, considering market share gains in food could be an important driver of growth. Bezos went in a different direction.
He revealed new commitments about being the Earth’s best employer and the Earth’s safest place to work, joining the company’s longstanding commitment to being the Earth’s most customer-centric company. Those commitments follow a recent unionization vote at a fulfillment center in Alabama where 24% of the roughly 3,000 employees who voted supported unionization, according to the National Labor Relations Board.
“While the voting results were lopsided and our direct relationship with employees is strong, it’s clear to me that we need a better vision for how we create value for employees — a vision for their success,” Bezos wrote in the letter. “If you read some of the news reports, you might think we have no care for employees. In those reports, our employees are sometimes accused of being desperate souls and treated as robots. That’s not accurate. They’re sophisticated and thoughtful people who have options for where to work. When we survey fulfillment center employees, 94% say they would recommend Amazon to a friend as a place to work.”
Bezos contends Amazon has always cared deeply for its hourly employees and is proud of the fact that the company has created opportunity for those who aren’t computer scientists and don’t have advanced degrees. Nevertheless, as Bezos transitions out of the CEO role later this year and is replaced in that capacity by current Amazon Web Services CEO Andy Jassy, he plans to channel his energies into the newly announced “Earth’s best” initiatives.
“In my upcoming role as executive chair, I’m going to focus on new initiatives. I’m an inventor. It’s what I enjoy the most and what I do best. It’s where I create the most value,” Bezos wrote. “I’m excited to work alongside the large team of passionate people we have in (operations) and help invent in this arena of Earth’s best employer and Earth’s safest place to work. On the details, we at Amazon are always flexible, but on matters of vision we are stubborn and relentless. We have never failed when we set our minds to something, and we’re not going to fail at this either.”
Creating Value and the Shortcoming of Physical Retail
Even though Amazon has been more aggressive in recent years with the opening of physical stores, think Amazon Fresh food stores and Amazon Go convenience store, Bezos seems to disparage the concept of physical shopping as being wasteful, while portraying the saving of time as a key element of the value Amazon creates for the 200 million members of the Prime program. Looking beyond well-known attributes of Amazon such as low prices, assortment and delivery speed, Bezos attempted to quantify the value of time he believes the company saves relative to physical retailers.
“Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store — driving, parking, searching store aisles, waiting in the checkout line, finding your car and driving home,” Bezos wrote. “Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved.”
If the value of that time is placed at $10 and hour, which Bezos maintains is a conservative figure, then the value of those 75 hours, less the cost of a Prime membership, is $630.
“We have 200 million Prime members, for a total in 2020 of $126 billion of value creation,” according to Bezos.
Being Yourself Takes Work
Aside from a lack of detail about the company’s specific sales generating activities, which Bezos doesn’t typically elaborate on in his letter to shareholders, there was also mention of commitments to reduce climate change and details about the wealth Amazon has created for shareholders and for small businesses who take advantage of the company’s third-party seller platform. Those are familiar themes, but Bezos ended the letter in a somewhat peculiar fashion, referencing a book called "The Blind Watchmaker" and doling out advice of a parental nature about the importance of being yourself and the work required to do so.
“We are all taught to ‘be yourself.’ What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness,” Bezos wrote. “The world wants you to be typical — in a thousand ways, it pulls at you. Don’t let it happen. You have to pay a price for your distinctiveness, and it’s worth it. The fairy tale version of ‘be yourself’ is that all the pain stops as soon as you allow your distinctiveness to shine. That version is misleading. Being yourself is worth it, but don’t expect it to be easy or free. You’ll have to put energy into it continuously. The world will always try to make Amazon more typical — to bring us into equilibrium with our environment. It will take continuous effort, but we can and must be better than that.”