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Coming from one of the biggest companies in the world, perhaps it’s not surprising that Amazon CEO Andy Jassy’s annual letter to shareholders reads like a victory speech. It spotlights how the e-commerce giant is not only getting faster, but cheaper, too: “As we look toward 2024 (and beyond), we’re not done lowering our cost to serve,” he wrote. “We’ve challenged every closely held belief in our fulfillment network, and reevaluated every part of it, and found several areas where we believe we can lower costs even further while also delivering faster for customers.”
This promise to lower costs comes after a year of heavy promotions. Jassy said Amazon customers saved nearly $24 billion in 2023, up almost 70% from the previous year. “Being sharp on price is always important, but particularly in an uncertain economy, where customers are careful about how much they’re spending.”
The CEO also highlighted how Amazon continued to invest in speedier deliveries with “regionalization,” which reduces the distance between merchandise and customers. Jassy said these efforts helped the company cut costs on a per unit basis for the first time since 2018, and add more products at a lower average selling price (ASP). It also “increased the number of items delivered same day or overnight by nearly 70% YoY.”
Victory lap complete, Jassy spent the back half of the letter talking about the future: “Sometimes, people ask us ‘what’s your next pillar? You have Marketplace, Prime, and AWS, what’s next?’... If you asked me today, I’d lead with Generative AI.”
He explained that over the years, Amazon has built what it calls “primitive services,” which the company described in 2003 as “the raw parts or the most foundational-level building blocks for software developers.” The idea is that primitives help the company build infrastructure and applications, like Amazon Web Services, that support the company while also remaining flexible for developers and third parties.
Now Amazon is banking on AWS to provide the foundation for a similar build-out of software and applications around GenAI. “We’re optimistic that much of this world-changing AI will be built on top of AWS,” Jassy said.