Amazon’s 4Q Shows Push to Control Labor Costs and Build Automated Last Mile

Amazon

Amazon’s fourth-quarter results on Thursday (Feb. 3) showed many things to Wall Street: resilience against an uncertain economic and pandemic-impacted backdrop; consumers continue to spend; third party sellers continue to sell and the cloud business continues to steam ahead.

And, the eCommerce juggernaut sees enough demand in the offing that it feels confident enough to boost Amazon Prime pricing by 17%.

And in what seems a sigh of relief, investors sent Amazon shares up more than 10% at the market’s open on Friday morning.

Digging a bit deeper, the data show, too, that the company has scale — and automation — in place to grapple fairly effectively with labor costs. The ongoing buildout of logistics and fulfillment offers a way to help with labor inputs.  And the contribution to net income we saw in the quarter from the Rivian investment trains a spotlight on the potential  to have electric vehicle (EV) delivery fleets, at scale and at the ready, to augment operations. Amazon has an order in for 100,000 delivery vehicles from Rivian. Its stake in the firm contributed more than $11 billion to Amazon’s reported $14.3 billion in net income for the latest quarter.

Read more: IPO Electric Vehicle Maker Rivian Drives Toward IPO With Amazon Owning 20%

We might be headed toward, at least in part, the development of an automated, autonomous workforce, where high tech marks everything from warehouses to trucks to robots venturing up the driveways to deposit items on customers’ doorsteps.

Keeping Labor Costs (Largely) in Line 

As for the data, the company said that the fourth quarter operating income was $3.5 billion. Amazon said that $4 billion in costs tied to inflation and some operational headwinds (read: supply chain pressure). The  company said on its earnings call that the inflation was related to wage increases and higher pricing from third-party carriers.

But it should be noted that that $4 billion had already been signaled by the company in previous commentary and guidance. The fact that the fourth quarter was in line with expectations shows that the company has strong visibility, and at least some control, over those line items.

Management noted that “the labor challenge” has been a bit more muted in the current quarter than had been seen in the fourth quarter.  CFO Brian Olsavsky said on the call that “we have to work to now make our operations more efficient as we get staffing levels up, and we’re going to plow a lot of our effort into increasing our transportation speeds and beating our pre-pandemic levels.”

The push to streamline, to automate warehouses and improve fulfillment, have been in place since well before the pandemic. As reported in this space in 2019, Amazon has been striving to automate its warehouses, end to end, by the end of this decade. The company is also reportedly examining new ways of completing package deliveries with Alia, an electric vertical takeoff and landing (eVTOL) aircraft built for cargo.