Amazon.com Inc. Chief Executive Officer Andy Jassy today released a letter to shareholders discussing the company’s business strategy, recent milestones and goals for the future.
The memo is the first of its kind published by Jassy since the executive succeeded Amazon founder Jeff Bezos as CEO last July. Bezos published a shareholder letter every April beginning in 1997, the year that the online retail and technology giant went public, and they were closely watched for clues to Amazon’s strategy on a number of fronts.
Jassy’s first shareholder letter covers many different aspects of Amazon’s business operations. The company’s supply chain is an especially major focus. Amazon had 253 fulfillment centers, 110 sortation centers and 467 delivery stations in North America at the end 2021, Jassy detailed in the letter, along with more than 600 additional logistics facilities around the world.
“Our delivery network grew to more than 260,000 drivers worldwide, and our Amazon Air cargo fleet has more than 100 aircraft,” Jassy elaborated. “This has represented a capital investment of over $100 billion and countless iterations and small process improvements by over a million Amazonians in the last decade and a half.”
Amazon has invested not only in growing the scope of its supply chain, but also in increasing its efficiency. “In the early 2000s, it took us an average of 18 hours to get an item through our fulfillment centers and on the right truck for shipment. Now, it takes us two,” Jassy wrote.
Over recent years, worker safety at Amazon’s warehouses has become a bigger focus for regulators. Worker safety was also a major focus of Jeff Bezos’ final shareholder letter as CEO last year, in which he set a goal of making Amazon “Earth’s Best Employer and Earth’s Safest Place to Work.”
Today, Jassy provided an update on the company’s efforts in this area. Data on incident rates throughout Amazon’s supply chain indicates that the company is “about average relative to peers,” Jassy wrote. “But we don’t seek to be average. We want to be best in class.”
That said, Amazon has been the target of unionization efforts, one of which won a majority of votes recently. Jassy told CNBC in an interview that although Amazon believes employees have the right to make a choice about joining a union, the company believes they’re better off not doing so.
Before becoming CEO of Amazon, Jassy led Amazon Web Services Inc., the company’s cloud computing business. Jassy dedicated a portion of the shareholder letter to discussing some of the business decisions that helped AWS become the industry’s top cloud provider. The executive also shared an update on AWS’ chip development efforts, revealing that cloud instances powered by its homegrown Graviton2 chip have been adopted by 48 of the top 50 Amazon EC2 customers.
In the consumer market, Amazon offers a growing number of services alongside its core e-commerce marketplace. One of those services, Prime Video, has emerged as a particularly important component of the company’s growth strategy. Amazon recently acquired storied film studio MGM for $8.45 billion to expand its content library and earlier signed a streaming deal with the NFL that is reportedly worth $1 billion per year.
“While there is so much progress in Prime Video from where we started, we have more invention in front of us in the next 15 years than the last 15,” Jassy wrote in today’s shareholder letter.
Jassy concluded the letter by outlining a few of the business concepts that guide Amazon’s strategy. One of those concepts, which Jassy referenced throughout the letter, is what the CEO terms “iterative innovation.”
In the context of AWS, Jassy wrote that “this iterative approach to innovation has not only given customers much more functionality in AWS than they can find anywhere else (which is a significant differentiator), but also allowed us to arrive at the much more game-changing offering that AWS is today.”
Amazon also applied this approach to its supply chain, Jassy detailed elsewhere in the letter, as well as to other parts of its business. The CEO credited iterative innovation as a major factor behind Amazon’s ability to provide one-day shipping through its Prime program.
“This type of iterative innovation is never finished and has periodic peaks in investment years, but leads to better long-term customer experiences, customer loyalty, and returns for our shareholders,” Jassy wrote.