Amazon CEO Andy Jassy Releases 2022 Shareholder Letter

I’ve read through Amazon’s shareholder letter, and here are a few takeaways from it.

Biggest news to me in this note is a move from a national fulfillment strategy to a regional fulfillment strategy.

Also, the company still has no clue in grocery. It felt like Andy Jassy stopped writing accidentally when he was going to tell us how the experiment worked.


  • The company has experienced an "unusual number of simultaneous challenges, including some of their own operating issues.

  • Took a deep look at the company business by business to ensure they had conviction about revenue, operating income, free cash flow, and long-term return on invested capital.

  • Shuttered Amazon bookstores (irony), 4-Star Stores, Amazon Fabric (??), Amazon Care, and some newer devices.

  • Changed free shipping above $35 on grocery.

  • Eliminated 27k roles

Fulfillment Costs to Serve

  • One of the company’s critical challenges (only one called out this way).

  • Nearly doubled revenue from 2019-2022. Doubled fulfillment network in 2 years.

  • Last mile network is now as large as UPS.

  • 2023 is on track for the fastest Prime speeds ever.

Changes made:

  • Scrutinized and redesigned processes and mechanisms (??) in fulfillment center and transportation network.

  • Changed inventory placement strategy: Big flip was a move from a national fulfillment network to an independent, largely self-contained regionalized fulfillment network model.

  • Still can ship nationally if necessary, but more as a backstop.


  • 60% of the company’s eCommerce business is third-party units.


  • $31B run rate growing 25% y/y (2022 numbers)

  • Investing in machine learning for advertising selection algorithms, planning and measurement solutions, and integrating ads into video, live sports, audio, and grocery.


  • $800B TAM in the US

  • Need Amazon Fresh as a mass-grocery format to address most of it. Whole Foods is specialty.

  • Have been experimenting with Fresh for a few years now.

??? That’s it? Did he stop writing?

Amazon Business

  • 2015 launch, $35B in sales.

  • 6 million customers

If Amazon Business were a Retailer, It Would Be the #17 Retailer in the US

  • $35B sleeping giant

  • Sales are Ahead of Dollar General, Macy’s, and AT&T

  • Double the business of Rite Aid, BJ’s Wholesale, Kohl’s (almost), Dell, Gap, Nordstrom’s


  • $85B run rate growing 29% y/y (2022 numbers)

  • Short-term headwinds due to cautious spending from companies. This is OK; we want to be a good partner.

Buy With Prime

  • D2C has a conversion problem. BWP has a 25% conversion lift.

  • D2C brands can now offer products to Prime members.

  • Amazon handles pick/pack/ship/payments/returns.


  • Low Earth Orbit Satellites

  • Reliable internet access around the world. Huge capital investment.

  • Thinks of this like an AWS-level bet. High-up front cost, huge profitable payout down the road.

LLM/Generative AI

  • Thinks it will be transformative (could write a whole paper about it)

  • Amazon has been using AI for 25 years.

  • Generative AI is the new bit. Didn’t say much or how.

  • AWS will be the best platform to serve generative AI apps.


Grocery is seemingly a continuation of Amazon’s belief they can add additional wallet share to their Prime user’s habits. However, Fresh for me makes no sense, especially in relation to a $35b B2B business, why not double down on that?

The logistics move to regional hubs is interesting, but does that not sound like FedEx?

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Today, if the inventory isn’t local to a market (think: 1 day), it could be anywhere in the country.

In the new model, if the inventory isn’t local to a market, it will be the closest regional hub. Exceptions could come from nationwide, but I expect they will work to minimize that.

That explains the chaos of the last year – they are rebalancing their entire inventory. That’s a big job.

There are only so many ways to do logistics. @Glick Hub and spoke.


Fundamentally, I think Amazon needs to buy a mature low-midrange grocer in each major region* to make Amazon Fresh work–to get the buying power and commercial expertise for a 1P product range.

(*at least one chain in the US, maybe 2-3; 1 in Canada, 1? in Mexico, 1 in UK++, 2-3 in Europe)
(++ Morrisons is the obvious buy which is why I think PE firm CDR bought it, Ocado would be more strategic especially in impacting Kroger, Iceland as the consolation prize; getting Tesco to spin out Booker/Budgens/OneStop/Central Europe might also work)