Amazon reorganisation of fulfilment network improves Q2 profitability


A US nationwide reorganisation of its fulfilment centre network has enabled high triple-digit operating profit growth in Amazon’s North American online sales for the financial quarter to June, 2023.

Overall net sales at the online giant grew 11% y-o-y to US $134,383m and operating profit grew 132% y-o-y to US $7,681m. Broken down regionally, its North American net sales grew 11% y-o-y to US $82.5bn and International were up 10% y-o-y to US $29.7bn.

Operating profit in its North America e-commerce operations grew to US $3.2bn from a loss of US $627m in Q2, 2022. Amazon CEO Andy Jassy said,“We continued lowering our cost to serve in our fulfilment network, while also providing Prime customers with the fastest delivery speeds we’ve ever recorded.”

During the last year, Amazon has split its US fulfilment network into eight broadly independent regions. This has reduced the amount of touches per package by 20% and the number of miles travelled per package by 19%, resulting in quicker and cheaper fulfilment.

Jassy said, “We’ve re-evaluated every part of our fulfilment network in the past year,” adding, “When shipments come from fulfilment centres that are closer to customers, they travel shorter distances, which cost less in transportation, gets there faster and is better for the environment”.

Amongst other highlights, the online giant claims to have delivered its largest ever selection of products within the same day or the next day to Prime members. It has been developing its same-day delivery offering and has indicated plans to double the size of its same-day fulfilment centres in major US metropolitan areas.

Where the US operations have moved into profitability, its international online sales operations remain loss-making. Losses fell to US $895m y-o-y in the quarter. It is investing heavily in its South Asia business,, where it plans to create 2m jobs by 2025. European operations have been hampered by macroeconomic factors.

Amazon’s overall profitability continues to be carried in a large part by its datacenter operations at Amazon Web Services (AWS). This saw a US $5.4bn profit in the quarter. Jassy said that growth in this business is stabilising as client companies expand their operations on the platform.

One AWS highlight was Ireland based online payment system operator Stripe, that has moved the majority of its operations onto AWS while providing payment services for Amazon’s US, Canadian and European online sales.    

Author: Richard Shrubb

Source: Amazon