Amazon: fulfillment cost still not under control?

Amazon posted stronger-than-expected sales for the 2022 holiday shopping season. Net sales for Amazon, which has been battling cost-conscious consumers and higher costs, were $142.2bn in the last quarter of 2022, up 9 percent from 2021. Sales events during the holiday season offered glimmers of hope that Amazon’s retail business may be staging a recovery, according to FT. But operating income for AWS, its largest profit driver, dropped marginally.

Our relentless focus on providing the broadest selection, exceptional value, and fast delivery drove customer demand in our Stores business during the fourth quarter that exceeded our expectations—and we’re appreciative of all our customers who turned to Amazon this past holiday season,” said Andy Jassy, Amazon CEO. “We’re also encouraged by the continued progress we’re making in reducing our cost to serve in the operations part of our Stores business. In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon. The vast majority of total market segment share in both Global Retail and IT still reside in physical stores and on-premises data centers; and as this equation steadily flips, we believe our leading customer experiences in these areas, along with the results of our continued hard work and invention to improve every day, will lead to significant growth in the coming years. When you also factor in our investments and innovation in several other broad customer experiences (e.g., streaming entertainment, customer-first healthcare, broadband satellite connectivity for more communities globally), there’s an additional reason to feel optimistic about what the future holds.”

Improving customers’ lives every day

Amazon obsesses over how to improve customers’ lives every day. Amazon had a record-breaking holiday season with customers purchasing nearly half a billion items from small businesses in the US during Amazon’s biggest Thanksgiving-through-Cyber-Monday holiday shopping weekend ever, customers around the world purchased hundreds of millions of products, and small businesses in the US generated more than $1 billion in sales over the five-day period.

Amazon made Same-Day Delivery faster in major metropolitan areas in the U.S., such as Los Angeles, San Francisco, Phoenix, Sacramento, and Portland, Oregon, where customers can now receive hundreds of thousands of items within hours. Amazon’s new Same-Day Delivery site in Sacramento is set to be the world’s first logistics facility certified as Zero Carbon by the International Living Future Institute. In the EU, Same-Day Delivery is now available in Belgium.


Amazon delivered the 10 millionth package using electric delivery vehicles from Rivian, custom-designed from the ground up with input from delivery services providers and their drivers. With thousands of miles driven, drivers have said the vehicle design and features make their jobs easier and more comfortable, the driving experience is improved, and they feel safe while driving. Amazon plans to have 100,000 electric delivery vehicles from Rivian on the road by 2030, saving millions of metric tons of carbon annually. Amazon partnered with TVS Motor Company to deploy a fleet of electric two-wheelers and three-wheelers for last mile deliveries in India. The agreement is part of Amazon’s plan to bring 10,000 electric delivery vehicles to India by 2025.

Amazon released a report detailing Amazon’s progress and methods to reduce packaging, including using innovative technologies, processes, and materials. Since 2015, these efforts have helped reduce the weight of packaging per shipment by 38% and eliminated the use of more than 1.5 million tons of packaging materials. Amazon continues to take steps to reduce single-use plastics in outbound packaging, recently announcing that it reduced average plastic packaging weight per shipment by over 7% in 2021 across its global operations network.

Amazon, in 2022, unveiled its largest on-site solar energy installation in Europe at a fulfillment center in Seville. Amazon announced that in 2022 they would grow their renewable energy capacity by 8.3 gigawatts (GW) through 133 new projects in 11 countries. With this, Amazon sets a new record for the most renewable energy purchased by a single company.

Cost of fulfillment?

The obsession with improving customers’ lives every day comes at a cost. The total cost of fulfillment rose from 31% in 2021 to almost 35% in 2022. Coming from 21% in 2017. In 2011 fulfillment costs were only 11% of sales. Are fulfillment cost still not under control?

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