Andy Jassy's 2022 Amazon Shareholder Letter: "An Unusual Number of Simultaneous Challenges"

What a way to start a letter.

In many ways, this shareholder letter was Andy Jassy's way to reset his control over the company and remind everyone that Amazon invests for the long-term on its own calculus. That said, I did learn a few new things from the letter:

1 - Lack of Grocery progress noted. Said they have been "experimenting" for 3 years with Amazon Fresh, their mass-market grocery concept.

Andy did not say they are making progress, or that they have figured it out. This is all we have for all that new leadership?

It felt to me like Andy stopped writing in this section out of disgust.

2 - Amazon has switched from a national fulfillment model to more of a regional hub and spoke model.

This was the biggest news by far and the only element cited by Andy as a "critical challenge" -- reducing fulfillment costs to serve.

Divided the country into 8 regions where inventory is located in that region and shipments if not from a same-day facility, will come at worst from that closest regional facility. Of course, they will still have the ability to ship nationally.

Previously, if the item wasn't local/same-day it could ship from literally anywhere in the country it sounds like.

This explains the supply chain chaos of the last year, limited space etc. They rebalanced their entire inventory footprint and developed and adopted a new supply chain operating model. That's quite a job.

3 - Addressing the Generative AI Elephant in the Room

Amazon has come under fire for being proficient at machine learning, but not being at the caliber of Google, Microsoft, and OpenAI at this race. This lack of progress has been somewhat of a black eye with the latest annoucnements.

Andy tried to remind folks that AWS is going to be the platform of choice for AI workloads (probably right) and they have more things on the way.

It felt like this section came up short. Andy even said he could write a whole letter just on the future here. Only problem is, delivery seems lacking as of yet.

This is not some average company, this is a trillion dollar market cap company who cannot miss the next revolution.

Seems like a work in progress.

4 - Buy with Prime and Marketplace get a mention

* We got an update on Marketpace 3P unit count, and it's 60%.

* The Buy With Prime team will be happy to get a mention.

Two theses for Buy With Prime

- D2C brands can now offer products to Prime members.

- DTC has a conversion problem. We raise it by 25%...

DTC brands aren't looking for Amazon to solve their conversion problem. Is this the merchant audience? Mainstream DTC brands?

I'm waiting. The main worry about Buy With Prime is that we have a "who is our primary customer" problem, not a technology or operations problem. That could continue to limit the service's effectiveness and focus.

Overall, is Andy's management team up to sorting these challenges?