Last week Amazon released their quarterly and annual sales and profit report. If you want to read the entire press release, you can find it at this link: Amazon Press Release. If printed out it would be about 25 pages of financials. My notes here are to highlight a few things and make some observations.
The sheer size of the company is staggering. Sales in 2019 increased 20% (!) over the prior year to a total of $280 billion … with a “b.” That looks like this: $280,000,000,000. If a stack of a billion one dollar bills is 67.9 miles high, the stack for Amazon’s sales in 2019 would reach 19,012 miles into the sky. Or, you could circle the entire earth five times.
If you were to spend $1,000 a day on Amazon, it would take you 28 million days to spend 280 billion dollars. That would keep you busy for about 76,712 years.
That is a lot of one-dollar bills.
That’s a lot of books, diapers, batteries, electronics, whatchamacallits, and whatevers.
Their net profit on that $280 billion was $11.6 billion or about 4%. A 4% profit is actually rather normal for operations that run on a “volume” business model. They make less per sale in order to drive overall sales. Some grocery stores and bulk clubs operate similarly.
They do not break out their product lines, but they do reveal in the press release that net product sales were $160 billion and net service sales were $120 billion. I cannot speak with authority, but I suspect the service sales include their cloud computing sales and subscription services like Prime. (A closer look shows that AWS, their cloud service, had $35 billion in revenue.)
They spent $40.2 billion on fulfillment and $18.8 billion on marketing. And $35.9 on “technology and content.” Could that include what they spent on original film and licensing fees for Amazon Prime video?
Speaking of Prime. They claim over 150 million paid Prime members around the world. Each paying $100 or so for access to special freight discounts, delivery services, Prime media, etc. That accounts for around $1.5 billion in revenue.
No matter what you think of Amazon, these are some jaw-dropping statistics.
They wield a lot of power in any retail space, not only books. In fact, books are but a blip on the entire revenue picture we see here.
We can debate (but we won’t do that here, please) the merit or lack of merit of Amazon. We can complain and praise in the same breath. But there is one fact we cannot ignore.
Amazon is here to stay.
(At least for the foreseeable future.)
That means we must deal with the beast as best we can. I caution every author about putting all their eggs in the Amazon basket (so to speak). They can change the rules overnight like they did in 2014 when they suddenly reduced the author royalty rate for audio books–back before audio was a hot commodity. (I blogged about that royalty reduction here.) Be careful to diversify if you can, just in case.
By the way, if you are a published author, make sure you have an Author Central account set up and claim your books. It’s like a mini-author website embedded inside Amazon.com. Take advantage of this free service. (Read Randy Ingermanson’s great article about it in this archived e-zine.)
Remember that Amazon is not the only place people shop. For example, Walmart had revenue of $514 billion in 2019, which makes them much larger, by revenue, than Amazon! But because they don’t have as robust or comprehensive of a book department, we don’t talk about them as much in our industry.
By comparison, Macy’s had $25.7 billion in sales in 2019, Best Buy had $42.9 billion in sales, and PetSmart had $6.4 billion in sales. And those are only three that were easy to look up.
As for our industry, Amazon continues to have a deleterious effect on brick-and-mortar bookstores. If you can buy nearly anything and get it, in some cities, delivered the same day to your home, it is really hard to compete. Bookstores in particular have to work that much harder to serve and retain their customers by giving them a reason to buy local and often. Back in my bookstore-management days I remember one customer complaining that we had moved locations and it had been hard to find us that day. He was particularly distraught because “I shop here all the time!” I had to break it to the man that our store had moved three years earlier. He obviously wasn’t a regular; but in his mind, we were where he “always” came for his Christian books, Bibles, and music. A local store needs frequent shoppers to survive, not just at Christmas and birthdays!
We live in interesting economic times. The ebb and flow of venerable brands is hard to understand and absorb. But writers simply must trust that readers still need quality content. You are the only ones who can provide it. If it is sold by Amazon, by Walmart, via digital pixels, by sidewalk vendors, or via paper-airplane delivery, it will still be read. And those words can change someone’s everything.
Steve, It’s hard to wrap my head around that much money coming into one organization. Better be kind to Amazon, eh?
Sharon K Connell
Yes, this is the world we live in. We authors have to take advantage of it by doing what you said, Steve.
If you authors haven’t created your author page on Amazon, do it now. People follow you. When you have a new release, your followers will receive an email telling them about it. Free advertising from Amazon.
They do get the books out for readers to read, so I’m grateful to Amazon for that.
The giants of the industry
make others go away,
and though they cause some misery,
they are here to stay.
The good old bays are now replaced
by pixels on a dlowing screen
and your heart’s desire’s traced
within the bowels of some machine
tended by a faceless crew,
acolytes of algorithms
who must do that which they do
for the profit-beast is driven
to ever raise bottom-line score
through convincing you to buy some more.
Brennan S. McPherson
I agree on resisting the Amazopoly when possible, but I receive way too much $$ from Kindle Unlimited page reads to NOT ride the wave while it’s happening. Even if you go all-in on Amazon (like I have) for the e-book, you can go wide with paperbacks and audiobooks. This is what I’ve done. I love Findaway Voices for Audiobook distribution (especially with BookBub’s Chirp program on board now). I have an upcoming Chirp promo on one of my audiobooks (that I recorded and edited in my kitchen) in March–Chirp is BookBub’s own audiobook retailer platform. I think companies like BookBub are becoming very important pieces in the author-preneur space, giving options that extend far outside the boundaries of Amazon. I’m very curious to see if they start their own e-book sales platform. It would make sense, after what they’ve done with Chirp. Their advertising platform (not the “featured deals” but rather the CPC and CPM bidding ads in their email blasts) have become my primary digital advertising platform for book launches and discount promos. That gives me flexibility to stretch beyond Amazon’s boundaries if I need to.
And for paperbacks, I go with both KDP Print for Amazon sales (I never do their wide distribution program because it’s worthless), and Ingram Spark for Amazon third-party sales and sales to bookstores and libraries (at a discount bookstores are used to seeing–albeit without returns, which is a problem). For one of my novels, paperback sales ended up being almost 40% of my revenue. Much of that was generated through Amazon, but not because I was exclusive.
There’s lots of options out there, and our choices need to be generated by a solid strategy, rather than fear or greed.
A very informative and interesting article Mr. Laube. Thanks so much for posting it.
You might like to watch this special about Amazon coming out soon. https://www.pbs.org/video/amazon-empire-rise-and-reign-jeff-bezos-trailer-eobiei
Wow! Those figures are way over my head. I knew Amazon was big, but I had no idea it was so massive. Thank you for the information.
Great info for new authors to be prepared. I checked out Author Central. Kudos to Marybeth Whalen for free advertising as their model.
This info confirms my wise investment in their stock a few years ago. Thanks for keeping us informed in all things pertaining to market and more Steve.
Sheri Dean Parmelee
Thanks for the info, Steve. I am considering doing an Amazon-published book and appreciate the insight.