Things haven’t been easy under Amazon president CEO Andy Jassy’s reign, particularly during the last year, but he is optimistic about the company’s future. In Jassy’s 2022 letter to shareholders posted to the Amazon website on April 13, 2023, the CEO noted the company has found a way to grow demand, even after the pandemic. Also, last year, the company focused on and innovated in some of Amazon’s largest businesses to improve the customer experience.

Now at Amazon for 25 years, Jassy replaced founder and then-CEO Jeff Bezos in July 2021, about 16 months into the pandemic when demand was high, and the company grew their operations and headcount to keep up with that demand. But times have changed, and Amazon has had to make some very difficult decisions in the last six months to adapt to a new macroeconomic climate.

“…we made important adjustments in our investment decisions and the way in which we’ll invent moving forward, while still preserving the long-term investments that we believe can change the future of Amazon for customers, shareholders, and employees,” Jassy wrote.

He reflected on Amazon’s history since he joined the company in 1997 when Amazon only sold books, did not have a third-party marketplace, and only did business in the U.S. Now, Amazon serves almost every country in the world and the third-party marketplace makes up about 60% of the company’s unit sales. Looking at revenue, in 1996, Amazon had $15 million in revenue. In 2022, the company had net sales of $149.2 billion, a 9% increase over 2021. Unfortunately, Amazon also had a net loss of $2.7 billion.

“Change is always around the corner. Sometimes, you proactively invite it in, and sometimes it just comes a-knocking. But when you see it’s coming, you have to embrace it. And the companies that do this well over a long period of time usually succeed. I’m optimistic about our future prospects because I like the way our team is responding to the changes we see in front of us,” Jassy said.

The CEO also addressed the elephant in the room – the significant operational changes the company has made in the last six months. The company reviewed each division, looked at its ROI and potential, and decided which businesses they would keep and which they would shut down. They also looked at pricing and have recently added new fees. As the result of the review, Amazon made many changes. Some of the more notable changes include the following:

• Laid off 27,000 employees
• Stopped pursuing physical stores like their bookstores, 4 Star stores and Amazon Go
• Closed Amazon Fabric and Amazon Care
• Paused construction on phase 2 of the construction of Amazon HQ2 in Virginia
• Decided to end Kindle Publishing for Periodicals
• Increased price of Amazon Prime from $119 a year to $139 a year
• Started charging fees for Amazon Fresh deliveries under $150
• Started charging fees for some Amazon returns to UPS stores
• Implemented a hybrid work schedule starting in May. Employees will work in the office at least three days of the week.

In addition to these changes, Jassy talked about AWS, which has an $85 billion annualized revenue rate, but it is still in the “early adoption” phase of its growth trajectory. In this economy, companies are slower to implement new technology solutions, Jassy said, but he believes that’s a short-term problem. AWS has significant potential for the future.

“In AWS, like all our businesses, we’re not trying to optimize for any one quarter or year. We’re trying to build customer relationships (and a business) that outlasts all of us; and as a result, our AWS sales and support teams are spending much of their time helping customers optimize their AWS spend so they can better weather this uncertain economy,” explained CEO Andy Jassy.

Other areas for growth and opportunity include Amazon’s online advertising business, Amazon Business, Amazon Healthcare through the Amazon Pharmacy, One Medical, the new Rx Pass membership program, Kuiper and Amazon’s investment in large language models and generative AI.

“I’m optimistic that we’ll emerge from this challenging macroeconomic time in a stronger position than when we entered it,” Andy Jassy said. “I strongly believe our best days are in front of us, and I look forward to working with my teammates at Amazon to make it so.

Insider Take

On the Amazon website, Jassy’s letter is marked as a 26-minute read. It is a lot to get through, but Amazon is an enormous company, and it has undergone quite a bit of change in the last year. He touched on many areas of opportunity, and he didn’t dance around some of the hard decisions they’ve made, specifically the layoff of 27,000 employees. That was perhaps the most significant Amazon news in the last six months. Whether you love Amazon or hate it, Jassy appears to be transparent about what he’s doing and why. Shareholders must be impressed at least a little. On April 12, the day before the letter was posted online, Amazon stock was valued at $97.83 per share. On April 13, Amazon stock was valued at $102.40 per share.