Dive Brief:

• Amazon cut costs in Q1 by increasing the number of product units it delivered per box, executives said on an earnings call Tuesday.
• Consolidating orders into fewer boxes helped the e-commerce giant's North America segment increase its operating income by $4.1 billion year over year up to $5 billion, SVP and CFO Brian Olsavsky said. Continued benefits from regionalized fulfillment operations and lower transportation rates also contributed to the jump.
• "When we're able to consolidate more units into a box, it results in fewer boxes and deliveries, a better customer experience, reduces our cost to serve, and lowers our carbon impact," President and CEO Andy Jassy said.

Dive Insight:

Order consolidation can tamp down delivery costs even as volumes increase. Doing so is just one of the many endeavors Amazon has pursued to trim its fulfillment expenses after aggressive growth during the COVID-19 pandemic strained profitability.

For example, the company is revamping its inbound fulfillment processes in the U.S. this year to put inventory closer to customers. Historically, sellers brought their inventory into Amazon's network at a handful of locations, Jassy said.

"We spent a lot of effort and time and expense in breaking those down and shipping them to lots of other places," the CEO said.

Amazon is pushing sellers to bring inventory into facilities closer to customers through an "inbound placement service fee" implemented earlier this year, in which the cost is impacted by the item's size and the facility location. For example, Western U.S. locations are likely to see higher fees than other parts of the country. The company also lowered outbound fulfillment fees, Jassy said.

"We believe we're going to be much more efficient in how we use the inbound network and how we partner with our sellers," he added.

Although Amazon is slimming down its fulfillment costs, it's still investing in its network to deliver products faster. The company reached its fastest delivery speeds to Prime members ever in Q1, aided by nearly 60% of their orders arriving the same or next day across its top U.S. metro areas in March, Jassy said.

Delivery times should shrink even further as the company builds more same-day facilities. Last year, the company announced plans to double the number of these buildings, which feature a streamlined fulfillment process.

"We still have a fraction of the number of those that we will have in the U.S. and that we'll have in other parts of the world, which will, again, both change our cost structure while increasing speed," Jassy said.