Amazon.com reported revenue of $606.1 million in its books/music/video segment in the fourth quarter ended December 31. The 12.6% increase easily beat sales gains reported by most bricks-and-mortar booksellers. For the entire year, revenue increased 11%, to $1.87 billion, and the segment had pro forma net income of $211.4 million for the year, a gain of 35%. The company does not break out the sale of books compared to music, video and DVDs.
The gains in the year were attributed to lower prices as well as to an increase in third-party sellers, which rose to over 500,000 in the year. The sale of used products accounted for 21% of units sold in the final quarter and resulted in unit sales increasing at a faster pace than dollar sales in both the b/m/v segment and in Amazon's electronics, tools and kitchen segment, according to company chairman Jeff Bezos. But Bezos made it clear that it was Amazon's "significantly lower prices" that were primarily responsible for boosting revenue growth in the year in the b/m/v group by 11%, compared to a decline of 1% in 2001.
To support his argument about the savings customers can achieve by buying books at Amazon rather than at physical bookstores, Bezos cited the results of a survey that compared the e-tailer's pricing on the top 100 new books to those found at a major chain. According to Bezos, the survey found that the 100 books would cost $1,561 at the chain and $1,195 at Amazon. Customers saved an average of 17% on paperbacks and 27% on hardcovers, Bezos reported, noting that Amazon's price was lower on 72 of the books on the list, the same on 25 titles and higher on three titles, which Amazon quickly lowered to meet it's competitor's price. "Our strategy is to offer low prices everyday, not just on a few items for a short period," Bezos said. To ensure that Amazon's total price (including shipping) remains low, the company said it was making permanent its offer of free shipping on all orders over $25.
Bezos said the entire company is entering 2003 with momentum, and sales for all of Amazon, which totaled nearly $4 billion last year, are expected to increase 15% in 2003. The company will also be adding new categories in the year, Bezos said.
