CNBC: Amazon CEO & President Andy Jassy Speaks with CNBC’s Jim Cramer on "Mad Money"
- Details
- Category: Business/Financial News
- Published on Thursday, 07 December 2023 10:19
- Written by CNBC Mad Money
In a two-part interview, CNBC's "Mad Money" Jim Cramer speaks with Amazon CEO Andy Jassy on Amazon's vast empire, consumer spending, the economy, Amazon influencers, retail partners, and the current pricing structure, inclusions, and deals of Prime.
Following is the unofficial transcript of a CNBC interview with Amazon CEO & President Andy Jassy on CNBC's "Mad Money" (M-F, 6PM-7PM ET) Wednesday, December 6. The second part of the interview will air tomorrow, Thursday, December 7 on "Mad Money" at 6pm ET.
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PART ONE:
JIM CRAMER: We got a chance to chat with the CEO of Amazon.com. Amazon's been on fire lately stocks up more than 70% for the year when the nation state names and make up the Magnificent Seven. So we can go next. If you've conquered retail, the number one cloud infrastructure play a major player in the advertising world. Let's take a closer look with Andy Jassy.
He's the president and CEO of Amazon.com. Mr. Jassy thank you so much for having us. Thank you... It is great to have you in person and the first thing I have to ask you is you are all those things I just mentioned, largest retail advertising movie production sports broadcaster grocer, pharmacy, hardware device, car retailer student. Now this is all under one roof. What kind of responsibility do you feel given the fact that this is actually a huge part of our economy?
ANDY JASSY: Well, first of all, it's great to be here with you, Jim. So thank you for being here. And you know, I think we feel across all we're in a lot of different diverse businesses, as you mentioned, but the thing that ties everything together at Amazon and the responsibility we feel is to make customers lives better and easier every day across every single one of our businesses. And if you think about our businesses, we have consumers, we have sellers, we have developers, we have enterprises, we have brands and creators. That's what we're trying to do across the businesses and you know, each of those businesses you mentioned, we believe there's an opportunity to change the customer experience and make people's lives easier and better. And that's what we're trying to do.
CRAMER: Okay, so, with all those businesses, I think you've got a better handle on what's going on with the economy than pretty much anybody in the world and you're not political. So tell me how's it look particularly after that huge cyber spending period?
JASSY: Well, consumers are still spending, they're being careful about what they spend on and they're looking for bargains and deals wherever they can, and wherever they can trade down on price they're trying to do so. And it's really why if you look at what we did in our holiday season, it's always important to save customers money, particularly during the holidays, and especially in this type of economy. And so we you know, in our prime big deals day, which was our exclusive event for prime members to kick off the holidays, we had 10s of millions of deals, and it was by far the best kickoff event that we ever did. And then if you look at what's going to happen, most people are not done with their holiday shopping. We have hundreds and millions of deals still have to come. They're dropping everyday till December 24. And so we know that customers care a lot about saving money and we're working really hard with our third party selling partners to provide them great deals so they can shop for the holiday season and feel good about it.
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CRAMER: Okay, we do have persistent inflation. You've said it yourself, we have higher interest rates, student loan payment assumptions, and yet they are still spending. I know they're looking for bargains, but it's incredible that it's still pretty robust economy interest rates so high. The Federal Reserve Chairman trying to cool things off.
JASSY: Well you know, I think people are going to buy certain retail items. There's a lot we'll have to go bad before people stop investing in detergent and shampoo and soap and things like that. And if you look at our consumables business, the growth rate there is pretty extraordinary. You're in significant part because we've been able to speed up our delivery so much in the last year and so when you can get items to people same day or next day at the latest, they end up considering you for a lot more purchases. But if you look at some of the items like more discretionary items, laptops or electronics or phones people will be more careful and where they may have taken the more expensive unit they're taking the less expensive unit and so we're still growing at a faster rate in those areas than you see the rest of the segment but you know more timid than they've done in the past.
CRAMER: I'm gonna go back to what you said on – so sometimes like razor blades Gillette, and they're there same day, I ordered like a very popular book, the new Reacher book, I know you got season two coming up. It's there the same day. How does this stuff get to me the same day? What occurs?
JASSY: Well, first of all, if you look at just the first half of this year in our top 60 metros, over 60% of the shipments were coming to people in the same day one or one day. So a lot of it has to do with a combination of two things. One is when we took our U.S. fulfillment network from a flat national network to eight regional hubs, we redid all the placement algorithms to get items close to where we're shipping to customers. We were not only able to take the transportation distances down, which lowers your transportation costs and speeds up delivery to customers but we also took our costs served out so those were it was a great customer experience, benefit for customers getting a faster and then also a total cost to serve down. And the other thing is that we have these sub same day facilities, which are a different service. So basically there's like in the same day, in just a few hours and the average purchase in those same day facilities from click to being ready to ship is 11 minutes. So it's a different design in those fulfillment centers. And we have top million, we've got a million SKUs that we can ship out of there will be shipped in the same day. So we moved from today to a lot of the shipments being one day and then increasingly we're being able to ship items to people in the same day.
CRAMER: Well, I know we're gonna talk about artificial intelligence later, but have you done enough work to be able to say that there's a level that if it comes quickly, that person won't go to the store because it's more convenient just to go to Amazon?
JASSY: You see it all the time that when sometimes people make the mistake where they assume that there is, you're kind of in the law of diminishing returns if you keep trying to speed up the delivery. But we do very rigorous testing and every time we can take delivery speed to be faster for customers it meaningfully changes their conversion rate and the rate at which they're willing to buy and what you find downstream for customers is when you're able to get them delivery much faster, they consider you for much more of their purchases and so it's customers love getting items quickly.
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CRAMER: Alright, so I like the reliability. I like things coming quickly. But they're these apparel makers okay, this I don't want to say the Chinese because one's from Singapore, the other ones based in Boston, Shein. And they got these prices that frankly I know you had to address with some pricing change for yours but they come in seven days, 17 days, 20. Why are people crazy about those and why did you have to adjust your pricing for seller?
JASSY: Well, first of all, I mean, I think you know as Jim these market segments are so gigantic, you know, and so, competition is really good. We've always thought it was good. It's good for customer competition, fair competition, but it's you know, it's good for customers. It's good for businesses, it's good for invention. And so, when you look at retail as an example, we have a pretty big retail business and we're still about just 1% of the worldwide retail market segment share, and it's still the case in the U.S. 80% of the retail is still in physical stores. And outside the US.. it's about 85% So these are giant businesses and they're gonna be a lot of successful players. I think that's good for consumers. We feel very good about what we provide for customers and it's differentiated because we have much broader selection than anybody else and we've only added to that in the last couple of years. And then as we were talking about earlier, we have very low prices. If you look at Profero the external analyst that looks at e-commerce heading into the holiday season, they show that Amazon's prices were 16% lower in the 15 categories and measure than any other retailer. So we're very low prices with lots of deals we've put together with third party sellers. And then customers care about deeply and love getting delivery quickly. And so if you have you know you can be successful with smaller selection and good prices and you know, longer delivery but you know, I feel pretty good about what we offer customers with how large our selection is the prices and then how fast the delivery we should price.
CRAMER: Were you surprised at the growth of these companies? I mean, it's out in nowhere.
JASSY: I think there are, as I said there are a lot of players that are going to be successful in the retail space there has always been and so you know we continue to try and do right by customers and we know what they care about and those inputs a selection price and really fast delivery continued that affirm.
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CRAMER: Well would you ever do that kind of influencer thing where basically if I talk up a product I get like 200 bucks from Amazon?
JASSY: I think everybody has different ways that they choose to dress customers. And, you know, I think the really best companies try to find ways to be inspired by things that you know that customers like so we'll always consider and listen and we care a lot about what our third party sellers care about and what our consumers care about. But what they tell us most is we want the broadest possible selection of low prices and very fast.
CRAMER: I want to be sure you did cut the prices –
JASSY: What we did was we just announced our new cost structure for sellers which we do once a year and we've lowered the cost for sellers and the commission that we take on apparel items and we always have a mix of different cost pieces that are reflective of our own cost structure and some if you look at we took some down we took outbound delivery fees down. We took the cost associated with apparel down others where we have cost that we're not really recovering we try to change that we can share in some of those savings together so we'll always have a mix of those.
CRAMER: You obviously… you don't want to lose to Shein –
JASSY: By the way, Shein has a storefront right in Amazon so they're also a partner. So you know most of the companies that we interact with it both in AWS as well as in our retail business. They're both partners, and then we also have some overlap.
CRAMER: Alright. My conversation with Amazon President CEO Andy Jassy continues after the break. I'm telling you he also doesn't want to lose. Stay with us.
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Both interviews can be seen here:
Following are links to video on CNBC.com: https://www.cnbc.com/video/2023/12/06/amazon-ceo-andy-jassy-whenever-customers-can-trade-down-in-price-they-do-so.html
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PART TWO:
JIM CRAMER: We're back with Andy Jassy, President and CEO of Amazon.com. Because this is arguably the most important company in the world. You know, I say that all the time. We got far too many questions to cover in one segment. Let's get right to it. Okay, Andy, give me the core value proposition of Prime right now.
ANDY JASSY: Prime is – and you know, for $14.99 a month, you get an incredible amount in there. So you get fast, reliable, unlimited free shipping across the hundreds of millions items we have. And then you get to use those same benefits off of Amazon where we have this program called Buy with Prime, that third party websites can offer Prime members the same free shipping and fast shipping and fast checkout. And then you get exclusive access to all sorts of Prime events like Prime Day in the summer or prime Big Deal Day that I was talking about earlier where you get all these great discounts and bargains and deals. And you get all the exclusive selection that you get in Prime Video from Thursday Night Football to Lord of the Rings to Reacher, which I know you watch, to Jack Ryan, Terminal List, Citadel – a great selection of exclusive video content. And you get the channels from our third party media partners like Max and Paramount+ and Discovery+ and BET and NBA League Pass. And then you get over 100 million free, ad free and free songs, as part of the Prime Music benefit. You get grocery shipping benefits. You get Prime photos. You get a subscription to Grub Hub, which has a $99 value a month. So, it's an incredible amount of value that Prime members get for $14.99 a month and it's part of why they shop across Amazon in the broad way they do.
CRAMER: Alright, well – I'm thinking well, why not charge double? We will all pay it.
JASSY: Well, and I appreciate that, Jim. You know, I think that we're – we add benefits to Prime all the time and we have for many years and we're always trying to give customers the best possible deal. And you know, from time to time we will raise the price as we keep adding more value just to make sure that we can afford a sustainable program but we're trying to make it you know as high value as we can and customers love it.
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CRAMER: I like this special events that you have and I'm thinking my fabulous colleague Carl Quintanilla – he's doing program for tonight 10 o'clock on Nashville. And you guys have just done a big thing in Nashville including a – auditorium. Could we see something like a Taylor Swift concert on Amazon, where if we are members of Prime we get it?
JASSY: Yeah, we have done a number of live concerts as part of our – a combination of Prime Music and Prime Video. I don't know if you watched the Black Friday football game which was the first Black Friday football game ever.
CRAMER: I stayed home.
JASSY: You did? And you watched the game?
CRAMER: Yeah, well I shopped on Amazon that's what we did. We didn't go to the store although the Jets –
JASSY: It was not the most competitive game. But actually if you watch the production, I thought it was pretty fun.
CRAMER: It was.
JASSY: And you know, one of the things that happened was we had a Garth Brooks concert that he did live in Nashville –
CRAMER: That's right.
JASSY: – which was available to our Prime members. So it's actually – because Black Friday was free to everybody, other people were able to watch it as well. But we do a number of concerts like that. There's all sorts of special events we do for Prime members.
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CRAMER: Okay, let's talk about some of the things you're doing with Amazon Web Services. Now, one of the reasons why the trust has a big position is this is a phenomenally profitable thing. I met you a few years ago and all you talked about was how you kept cutting prices, cutting prices, cutting prices because you want everybody and you also want good deals. Last year, the rate of growth slowed, but then we got a bounce. Is that bounce continuing?
JASSY: Well, I think that, you know, if you look at the growth rates of AWS, you know, per Q3, the last results released, you saw that the year over year growth rate started to stabilize 12% year over year. And, you know, I think that while there's still some cost optimization going on from companies that are concerned about the economy, it's largely attenuated. It's not nearly at the same rate as before, and I think we made a decision in the beginning of the pandemic, right, wrong or different. We think it was the right decision, but was different from other companies. That instead of – even though we knew it might be a difficult economy, instead of trying to squeeze every last dollar from our customers, which a lot of our competitors did, we would try and side with customers. And we would try and help them weather the pandemic in the uncertain economy. And we knew that in the short term, it might lead to lower revenue growth, but if we do right by customers over a long period of time – we're trying to build business that outlasts all of us – we believe it'll help customers and the business will ride along with it. So I feel I think we made the right decision for customers. I think they're really appreciative. We see them. We feel really good about the deal growth that we've seen in the last few months. And I continue to be very bullish about AWS come 2024 and beyond. I think that you know, the business today is a $92 billion annual revenue run rate business. 90% of the global IT span is still on premises. If you believe that that's going to flip in the next 10 to 20 years, which I do, if we continue to have the best functionality by a large bit like we do, if you continue to have the largest partner ecosystem, which we do, with the strongest operation performance and security as we do and the customer orientation we do, I think we have a lot of growth in front of us. Not to mention what's happening in generative AI, which I think is going to transform virtually every customer experience. That's another huge opportunity for the AWS business.
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CRAMER: Well in the conference call, Andy, you did say – and I'm going to quote you – "tens of billions of dollars in revenue over the next several years." How's that possible?
JASSY: Well, if you think about virtually every customer experience that you know, if you think about all of those being changed and evolved and reinvented with generative AI in the middle of it. I mean the global IT spend is a really, really large number. It's trillions of dollars. So you know, I think that very – in my opinion, almost all the generative AI especially because all those efforts are effectively starting now we're going to be in the cloud. There isn't going to be this 90% of generative AI spend on premises and so I think that there's gonna be a huge number of – every company is going to read that their core customer experience is that way.
CRAMER: I'm not sure they even know what they're doing. They're in it. They say they have an AI strategy. But I mean, I know you must help a lot of companies, but aren't there a lot of companies that are just doing it for show?
JASSY: I think almost every company now, either they themselves, the leadership team or their board, knows that this is really transformational, what's happening with generative AI. And so everybody knows that they have to change their experiences. Now, I think a lot of companies are still in the stage of trying to figure out at what layer in the stack they want to operate at in that generative AI stack and there's three main layers and they're trying to figure out where and then they're trying to figure out which experiences should they go after first and what are they actually going to change about it and a lot of what we do. Because most of the conversation in generative AI has been at that top layer of the stack which is really the application layer, but all three layers are giant. And we're investing in all three of them in a very substantial way. That lower level is really the compute to train the models and run the predictions of inferences. The key there are chips you know and we've been building our own custom AI chips now for several years.
CRAMER: At the same time, you were the first to go Grace Hopper. You were the first to go high end Nvidia.
JASSY: We have a deep partnership with Nvidia. All of their new chips have always come out on EC2, our AWS EC2 instances first, and at the same time, we're also building our own chips. We have something called training for training and Inferentia for inference for people that want to push the envelope on price performance. And so that bottom layer, you have a lot of companies will build those guard language models on those chips. And then that middle layer is really where companies that don't want to invest all the people on the dollars and go build their own models, they want to take an existing large language model, customize it with their own data, and then be able to run it as a managed service. And that's why we built the service called Bedrock, which takes not only our own models which we call Titan, but leading third party models like Anthropic, Stability and Llama2 and Cohere lets them take those models, customize it not leak their data back into the general models, and they have the same security and access control and features they have in AWS that they can use in that service. So all three layers that stack really matter. Companies are trying to figure out when they're going to build versus when they're gonna leverage another model and we are helping them do it.
CRAMER: It's definitely for real and that's what matters. That's Andy Jassy. President and CEO of Amazon. Don't miss the final part of my interview. Hit some fireworks during tomorrow's show.
