What were the biggest ecommerce takeaways from Amazon’s Q2 earnings call?

Amazon.com Inc. released its earnings report last week, covering several key facets of its ecommerce business.

President and CEO Andy Jassy told investors on Amazon’s Q2 earnings call that the ecommerce giant has been improving its artificial intelligence and machine learning technology. It has also been making its fulfillment network more efficient. Jassy also said Amazon Business, its B2B division, is one of its fastest growing offerings.

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by 2023 third-party GMV. The latest analysis of the industry as whole is published within the 2023 Global Online Marketplaces Report.

For more detailed coverage, read our Amazon Q2 earnings story.

1. Amazon has been refining its AI

Jassy last week said AI “is going to be at the heart of what we do.” Moreover, he said every business division within Amazon has multiple ongoing generative AI initiatives.

Among those initiatives, Amazon has built CodeWhisperer, an AI-powered coding companion that recommends code snippets directly in the code editor. This is meant to accelerate developer productivity in the coding process.

But Amazon’s work in the AI sphere is still in an early phase, he said.

“Generative AI has captured people’s imagination, but most people are talking about the application layer, specifically what OpenAI has done with ChatGPT,” Jassy said. “It’s important to remember that we’re in the very early days of the adoption and success of generative AI, and that consumer applications is only one layer of the opportunity.”

2. Faster fulfillment in Amazon’s Q2 and beyond

In its fiscal Q2, Amazon reduced the miles its drivers traveled to deliver packages to customers by 19%, Jassy said. It did so through “regionalization,” or its logistics overhaul that shifts its fulfillment network from a national one to a network divided into eight regions that can each operate on their own.

This has led to a 20% reduction in number of touches for each delivered package, Jassy said.

“When shipments come from fulfillment centers that are closer to customers, they travel shorter distances, which cost less in transportation, gets there faster and is better for the environment,” Jassy said.

He said Amazon’s development and expansion of same-day fulfillment facilities has driven this increase in efficiency. He added that the same-day facilities are Amazon’s fastest fulfillment mechanism and one of its least expensive.

The same-day facilities are located in the largest metro areas around the country, Jassy said. Amazon intends to double the number of these facilities, he said.

“While we’re seeing strong early results from this regionalization effort, we still see several ways in which we can be more efficient in this structure and we believe will improve productivity further,” Jassy said. “We’ve also re-evaluated virtually every part of our fulfillment network this past year and see additional structural changes we can make that provide future upside.”

3. Big business, small business

Jassy emphasized Amazon Business’ $35 billion annual run rate for gross sales. It serves more than 6 million customers.

Still, he said, Amazon has only a fraction of the features it needs “to address more of the enterprise at this point.” For example, there are features to make bigger procurement workloads easier for companies.

Merchants that use Amazon’s “Buy with Prime” feature, on average, increased their shopper conversion 25%. That “makes a real difference to their business,” Jassy said.

He added that those who “participate in Prime Day activities, in aggregate, experienced a 10x increase in daily Buy with Prime orders during the sales event period versus the month before we announced Prime Day.”

Although Jassy and other Amazon representatives did not mention its small business sellers on the Q2 earnings call, Amazon did mention them in its earnings release.

It said more than 60% of Amazon sales in its marketplace came from independent sellers, most of them small and medium-sized businesses.

U.S.-based independent sellers sold more than 4.1 billion products and averaged more than $230,000 in sales, Amazon said. It also announced a filter on its marketplace to search for small businesses.

Check back for more earnings reports.

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