The 5 Most Interesting Quotes from Amazon’s Latest Earnings Call
Amazon reported its fourth quarter 2022 financial results last week. Total sales grew 9%, and total operating profit declined 21% to $2.7 billion for the quarter. But while the metrics for sales and profitability were lackluster, they were at least partially understandable given the current macroeconomic environment. And leaders at branded manufacturer organizations shared with our Brandrunner community that Amazon still remains a bright spot in their growth stories relative to the broader retail market.
Amazon CEO Andy Jassy joined the earnings call this quarter and had a lot to say regarding the future of Amazon. Here are five quotes that stood out to me—four from Jassy, and one from Amazon CFO Brian Olsavsky.
1 - on consumer spending
“With the ongoing economic uncertainty, coupled with the continuation of inflationary pressures, customers remain cautious about their spending behavior. We saw them spend less on discretionary categories and shift to lower-priced items and value brands in categories like electronics. We also saw them continue to spend on everyday essentials, such as consumables, beauty, and softlines.” - Brian Olsavsky, Amazon CFO
Why it’s interesting: While not surprising, this is a helpful confirmation of softening consumer spend that is affecting most of retail, not just Amazon. Amazon touted strong holiday volumes, but they were partially driven by significant promotional activity, which limits top-line sales potential. We can expect this softness to continue through 1Q 2023, as evidenced by Amazon’s tempered 1Q guidance of 4-8% sales growth.
2 - on amazon focus areas
“In North America as well as across the entire business, we're working really hard to streamline our costs. … Probably the No. 1 priority that I spent time with the team on is reducing our cost-to-serve in our operations network.” - Andy Jassy, CEO
Why it’s interesting: A lot of air time on the investor call went to Amazon’s North American operations and its significant dip in margins over the last several quarters. During COVID, Amazon doubled its fulfillment center network and nearly doubled its transportation network in response to huge spikes in consumer demand on Amazon. As Jassy said, an expansion of that size and done that quickly creates “a little bit [of a] different network.” So, Amazon has a lot of work to do to increase efficiencies and optimize utilization across the networks—work that will continue into 2023.
3 - on amazon’s big bets
“We are very enthusiastic about our investments in streaming entertainment devices, our low Earth orbit satellite Kuiper, healthcare, and a few other things. … Do I think every one of our new investments will be successful? History would say that that would be a long shot. However, it only takes one or two of them becoming the fourth pillar for Amazon for us to be a very different company over time. So, I think it's very worthwhile. We're going to continue to invest. We're going to be very thoughtful about how we streamline our costs. And I think you see a lot of that. But we're also going to continue to invest for the long term.” - Jassy
Why it’s interesting: Analysts (and investors at large) have a lot of questions about how Amazon is balancing its profitability challenges with its long-term investments, especially after closing some programs down such as Amazon Care and Amazon Explore, and slowing down brick-and-mortar grocery expansion. Here, Jassy reaffirms its commitment to experimentation and long-term investments, but clarifies that the company is streamlining costs where it can and being a bit more calculated with where and to what level long-term investments are being made. Also, Jassy noted Amazon’s acceptance of failure, admitting that all of these investments likely don’t result in success. This is in line with Amazon’s history and culture.
4 - on amazon FRESH STORES
“We have a few dozen stores so far. We're doing a fair bit of experimentation today in those stores to try to find a format that we think resonates with customers, it's differentiated in some meaningful fashion, and where we like the economics. … We've decided over the last year or so that we're not going to expand the physical Fresh doors until we have that equation with differentiation and economic value that we like. But we're optimistic that we're going to find that in 2023.” - Jassy
Why it’s interesting: If you’re a big grocery vendor with Amazon, you’ve likely felt a whiplash effect over the last few years as Amazon has shown commitment to the growth of its brick-and-mortar grocery business only to then hit the brakes for one reason or another. In perhaps its most public explanation yet, Amazon shares it is hitting the brakes yet again as it has yet to find the format that works for customers as well as its financials. Amazon closed some of its Amazon Fresh stores in 4Q that had low growth potential.
5 - on STREAMING ENTERTAINMENT AND RETAIL
“We know that, again, investments like [Thursday Night Football and Lord of the Rings: Ring of Power] will help with not only new Prime member acquisition, but also retention. And we see a direct link between that type of engagement and higher purchases of everyday products on our Amazon website.” - Jassy
Why it’s interesting: Amazon’s commentary on its streaming entertainment business always piques my interest. It’s a reminder of the connected consumer—in this case, the connection between very upper funnel (with no purchase intent) and lower funnel (purchasing on Amazon). Consumers' lifestyles and shopping behaviors don’t happen in two different vacuums, and consumers are increasingly leaning into digital platforms for both of these parts of life. Thus, I believe Amazon’s entertainment and retail connective tissue is an example of why it’s worthwhile in modern commerce to pursue meaningful, full-funnel relationships with the consumer.
WANT MORE?
These quotes are just a snippet of the Amazon 4Q22 Recap we provided members of our FREE private LinkedIn community of ecommerce experts—the Brandrunner Forum. Join the group for the full PDF recap and the chance to attend live debriefings of Amazon’s future quarterly results.
ABOUT the authorClaire McBride leads Research, Insights and Education for Netrush. Her entire career has been centered in the consumer and retail space, spending the last six years helping brands grow and optimize their ecommerce businesses through written research, events, share group discussions and one-on-one consulting. Prior to joining Netrush, she led the ecommerce market research division at Cleveland Research Company. Connect with Claire.
