Amazon Snapshot: Despite economic uncertainty, consumers are spending more on everyday essentials, such as consumables, beauty, softlines; company says focus on customer sets it apart in these times, including focus on delivery speed, breadth of selection

Sample article from our Logistic & Supply Chain

February 16, 2023 () –

Performance:

Amazon’s Q4 worldwide net sales were up 12% year-over-year to US$149.2B. 

  • Company says during periods of economic uncertainty, consumers are “very careful about how they allocate their resources and where they choose to spend their money” 

  • Amazon believes, historically, its focus on the customer helps to set it apart in such times

 

In worldwide stores business, customers remain cautious about spending behavior amid ongoing economic uncertainty and continuation of inflationary pressures.

  • Consumers are spending less on discretionary categories  

  • Consumers are shifting to lower-priced items and value brands in categories such as electronics  

  • Consumers are continuing to spend on everyday essentials, such as consumables, beauty and softlines 

    • Company sees a direct link between higher purchases of everyday products and the kind of new member acquisition and retention driven by Thursday Night Football and Lord of the Rings: Rings of Power, which both had record sign-ups for Prime membership 

 

Amazon’s third-party sellers comprised a record 59% of overall unit sales 

  • Company’s advertising capabilities helped sellers reach customers in the competitive holiday season, despite a macro environment that required scrutiny of marketing budgets 

  • Advertising revenues up 23% year-over-year 

 

Supply Chain: 

Amazon continues to progress in streamlining operation costs in its stores business. 

  • Company entered Q4 with labor “more appropriately matched” to demand, driving productivity gains 

  • Process and tech improvements resulted in higher logistics productivity and improved line haul fill rates, overperforming expectations 

  • Productivity improvements continue across fulfillment centers 

  • Leverage driven by strong holiday volumes

  • Reducing cost is a “number one” priority 

 

Brick-and-Mortar:

Amazon is exiting physical stores with “low growth potential” and halting expansion of Amazon Fresh until it finds differentiation and economic value

  • Company is optimistic it will find those qualities in 2023 

  • Company believes grocery is a “significant opportunity” and is focused on serving customers through multiple channels, including online delivery, pickup or in-store shopping

    • Over time, company believes grocery is going to be omnichannel, and having omnichannel “is going to really matter” 

  • Company wants to build its grocery brand to scale meaningfully over time, including with physical stores

    • “If you really want to have significant market segment share in perishables, you typically need physical stores,” says CEO Andy Jassy

    • “If you want to have a mass physical store offering, you need a different offering," he adds

  • Whole Foods, is a "very significant-sized" business that's continuing to grow

    • Despite being a premium product it’s a “good business for us in the grocery space” 


Looking Forward:

Jassy says company is “maniacally focused” on customer experiences, which are “always going to be a top priority for us.”  

  • Company is looking to raise its speed of delivery to achieve more one-day shipments 

  • Company believes “continuing to get products to customers faster, makes customers happier” and drives higher conversion rates 

  • Selection will also “always be a very high area of focus,” as company's "unmatched selection... matters a lot” to customers  

    • Speed and selection drove Q4 sales despite a “very competitive and deal-driven environment” 
       

 

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Chelsey Quick
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