Amazon’s Customer-Centric Approach Keeps It Ahead of the Curve
At A Glance
- Amazon’s net sales grew 9% in the fourth quarter to $149.2 billion, compared to $137.4 billion in the Q4 2021
- Amazon's number one priority will always be to reduce its costs across the operations network
- Second priority is speed, ensuring that it can quickly deliver the products to its customers and guarantee customer satisfaction
- Amazon then concentrates on ensuring that its pricing remains sharp
- Another critical area that Amazon continually focuses on is improving the customer experience
Most businesses struggled to keep up with unprecedented challenges when COVID-19 hit. However, Amazon’s customer-centric approach has helped the company differentiate itself from its contemporaries in difficult times, and the company continued to expand and grow significantly.
Amazon’s net sales grew 9% in the fourth quarter to $149.2 billion, compared to $137.4 billion in the fourth quarter of 2021. North American division sales climbed 13% year-on-year to $93.4 billion, or 14%, excluding changes in foreign currency rates.
Due to ongoing economic uncertainty and inflationary pressures, customers continue to be conservative about their expenditures. Amazon saw that while customers continued to spend on bare essentials like consumables, soft lines, and beauty, there was a drop in spending on discretionary categories and a move to lower-priced goods and value brands in categories such as electronics.
Amazon customers continue to find Prime membership extremely valuable, and the company continues to invest in improving its benefits. These benefits include competitive pricing, faster delivery speed, and broad selection.
When it comes to the Amazon Go and Amazon Fresh physical stores, Amazon is constantly refining its store formats to determine the designs that will strike a chord with customers, build the grocery brand, and allow it to expand meaningfully over time. Amazon periodically accessed its store portfolio and decided to exit stores with low growth potential. Amazon announced in March 2022 that it intends to close all of its 68 brick and mortar bookstores, shops carrying home goods and toys, and pop-ups in U.S. and U.K.
“We continue to believe grocery is a significant opportunity, and we're focused on serving customers through multiple channels, whether that's online delivery, pickup, or in-store shopping,” said SVP and CFO, Biran Olsavsky in a recent earnings call with analysts. “As we head into the new year, we remain heads-down focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders.”
For Amazon, the number one priority will always be to reduce its costs across the operations network. For instance, Amazon took 25 years to build a fulfillment center footprint, which doubled in just a couple of years. The second priority for Amazon is speed, ensuring that it can quickly deliver the products to its customers and guarantee customer satisfaction.
Amazon then concentrates on ensuring that its pricing remains sharp. Sharp pricing becomes especially important in an uncertain economy, where customers are even more conscious about their expenses. Another critical area that Amazon continually focuses on is improving the customer experience, be it the addition of Buy with Prime, which allows users to avail their Prime benefits on other websites as well, apart from Amazon.
“We exist to make customers' lives better and easier every day and relentlessly want to do so. Being maniacally focused on the customer experiences, always going to be a top priority for us,” said the president and CEO, Andrew Jassy. “At the same time, and this is true in North America as well as across the entire business, we're working really hard to streamline our costs and trying to do so at the same time that we don't give up on the long-term strategic investments that we believe can meaningfully change broad customer experiences and change Amazon over the long term.”