SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology infrastructure costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are incurred in the U.S. and are allocated to our North America segment. There are no internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

North America

The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused online and physical stores. This segment includes export sales from these online stores.

International

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused online stores. This segment includes export sales from these internationally-focused online stores (including export sales from these online stores to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused online stores.

AWS

The AWS segment consists of amounts earned from global sales of compute, storage, database, and other service offerings for start-ups, enterprises, government agencies, and academic institutions.

Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):



	Three Months Ended March 31,
	2018			2019
North America
Net sales	$	30,725		$	35,812
Operating expenses	29,576			33,525
Operating income	$	1,149		$	2,287

International
Net sales	$	14,875		$	16,192
Operating expenses	15,497			16,282
Operating income (loss)	$	(622	)	$	(90	)

AWS
Net sales	$	5,442		$	7,696
Operating expenses	4,042			5,473
Operating income	$	1,400		$	2,223

Consolidated
Net sales	$	51,042		$	59,700
Operating expenses	49,115			55,280
Operating income	1,927			4,420
Total non-operating income (expense)	(11		)	(19		)
Provision for income taxes	(287		)	(836		)
Equity-method investment activity, net of tax	—			(4		)
Net income	$	1,629		$	3,561

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):



	Three Months Ended March 31,
	2018		2019
Net Sales:
Online stores (1)	$	26,939	$	29,498
Physical stores (2)	4,263		4,307
Third-party seller services (3)	9,265		11,141
Subscription services (4)	3,102		4,342
AWS	5,442		7,696
Other (5)	2,031		2,716
Consolidated	$	51,042	$	59,700

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(1)

Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer a wide selection of consumable and durable goods that includes media products available in both a physical and digital format, such as books, music, videos, games, and software. These product sales include digital products sold on a transactional basis. Digital product subscriptions that provide unlimited viewing or usage rights are included in Subscription services.


(2)	Includes product sales where our customers physically select items in a store.


(3)	Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.


(4)	Includes annual and monthly fees associated with Amazon Prime memberships, as well as audiobook, digital video, e-book, digital music, and other non-AWS subscription services.


(5)	Primarily includes sales of advertising services, as well as sales related to our other service offerings.