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- Amazon must cut costs to invest in new growth, says retail CEO Doug Herrington.
- Cost reductions focus on delivery inefficiencies, improving the cost of shipping each package.
- Amazon invests in AI data centers, warehouses, and fast shipping for future growth.
Amazon has to continue cutting costs if it wants to invest in new growth opportunities.
That’s according to Amazon’s retail CEO Doug Herrington, who stressed the need to cut costs and invest in new ideas simultaneously during last month’s internal all-hands meeting, which Business Insider obtained a recording of.
“We have to keep reducing costs so that we can afford the big investments in big new businesses,” Herrington said.
More specifically, Herrington was referring to Amazon’s cost-to-serve of each shipment, a metric that measures the cost of fulfilling a shipment and moving it through the supply chain, and how it can be improved by eliminating inefficiencies across the delivery process. Herrington said Amazon reduced the average cost-to-serve per unit because of its investments in faster delivery and better customer service.
Herrington’s remarks signal that Amazon’s yearslong cost-cutting effort will likely continue this year, even as it makes huge investments across the business.
Since late 2022, Amazon has laid off at least 27,000 people and shuttered a series of less profitable services and internal projects. Last month, Amazon let go of about 200 more employees in its fashion and fitness group.
Those moves have resulted in record profits and cash balances for Amazon, a change that Wall Street has welcomed in recent years. At the same time, Amazon has made huge investments in data centers for AI and warehouses to make deliveries more efficient. In 2025, Amazon is expected to spend a record $105 billion in capital expenditures.
Amazon’s spokesperson declined to comment on this story.
‘Every single penny matters’
During the meeting, Herrington said cost reductions and new investments should not be exclusive but complementary. They need to be “balanced” because the goal is to drive more efficiency, he said.
“My suggestion would be for all the teams that if you find yourself only doing cost reduction with no invention and innovation, or if you find yourself only working on innovation and not thinking at all about how to become more efficient, then you probably don’t have the right balance and that it’s up to all of us to make sure that within our team and within our portfolio of work that we’re working on, we’re doing both at the same time,” Herrington said.
Herrington also said in the all-hands meeting that Amazon will continue to invest in fast shipping, such as same-day and drone delivery services. And Amazon will keep expanding its product selection through the low-price service Haul and Fresh Grocery while adding new emerging brands and premium, luxury brands to its marketplace. Lastly, Amazon is improving shopper convenience through personalized AI services, like Rufus, he said.
Gale Carpenter, Amazon’s retail CFO, echoed the same message during the meeting. She said the cost cuts enable Amazon to invest in better shopping experiences, like faster delivery and better prices. Amazon’s recent investments in warehouses to serve smaller regions have saved transportation costs because packages travel shorter distances, she said.
“As a reminder, this work isn’t just about cost reduction — it enables us to invest in a better customer experience. When we reduce waste and inefficiency, we can offer faster delivery, better prices, and expand selection in a profitable way,” Carpenter said.
Amazon has been able to improve the average cost-to-serve on a per-unit basis for 2 straight years and is continuing the “momentum” for 2025 as well, she added, while encouraging employees to share more cost-saving ideas.
“We’re in a game of pennies,” Carpenter added. “Every single penny matters, so keep bringing your ideas forward.”
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