UK Markets closed
  • Oops!
    Something went wrong.
    Please try again later.

Bezos: Amazon created $164 billion in 'value' for its customers last year

Julia La Roche
·Correspondent
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.

Amazon (AMZN) founder Jeff Bezos’ final letter as CEO estimates that the e-commerce giant created $164 billion in value for its customers last year, including $126 billion in value for its Prime members and $38 billion for Amazon Web Services (AWS) customers.

In the wide-ranging letter, Bezos revealed that Prime membership surpassed 200 million last year worldwide. According to Bezos, 28% of these customers buy something on Amazon in three minutes or less, and half finish making a purchase in under 15 minutes. He noted that a typical shopping trip to a physical store takes about an hour when taking in driving, parking, shopping, and the checkout into account.

“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. That’s important. We’re all busy in the early 21st century,” he wrote.

Using a “conservative” $10 per hour estimate, Bezos concluded that the 75 hours saved minus the Prime membership cost gave each member $630 in value. With 200 million members globally, that equates to $126 billion in total value creation last year.

[Read more: Amazon Prime now has 200 million members, jumping 50 million in one year]

Bezos acknowledged that determining the value creation for AWS is challenging, but his “conservative” estimate is $38 billion, bringing total customer value creation across AWS and Prime to $164 billion.

Bezos noted that Amazon created $21.3 billion value for shareholders — its net income for the year. Since going public in 1997, Amazon has created $1.6 trillion of wealth for shareholders.

“Who are they? Your Chair is one, and my Amazon shares have made me wealthy. But more than 7/8ths of the shares, representing $1.4 trillion of wealth creation, are owned by others,” he added.

The 57-year-old is the world’s richest person, with an estimated net worth of $196.4 billion, according to Forbes.

He added that for Amazon’s 1.3 million employees worldwide, the company generated $80 billion, plus another $11 billion in benefits, for a total of $91 billion.

Bezos estimates that for third-party sellers on its platform, profits were between $25 billion and $39 billion, but “to be conservative,” he went with $25 billion for his value-creation figure. More than 1.9 million small-and medium-sized businesses sell on Amazon, accounting for nearly 60% of its retail sales, he noted earlier.

In summary, Bezos noted that the value created for shareholders was $21 billion, for employees $91 billion, for third-party sellers $25 billion, and for customers $164 billion, at a total of $301 billion.

“If each group had an income statement representing their interactions with Amazon, the numbers above would be the ‘bottom lines’ from those income statements. These numbers are part of the reason why people work for us, why sellers sell through us, and why customers buy from us. We create value for them. And this value creation is not a zero-sum game. It is not just moving money from one pocket to another. Draw the box big around all of society, and you’ll find that invention is the root of all real value creation. And value created is best thought of as a metric for innovation,” Bezos wrote.

Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.

READ MORE:

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.