Amazon CEO Andy Jassy: Sellers will pass increased tariff costs on to consumers

By CNBC Television

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Key Concepts:

  • Tariffs and their potential impact on consumer prices.
  • Amazon's strategy to mitigate the effects of tariffs.
  • Consumer behavior in response to potential price increases.
  • The role of third-party sellers in absorbing or passing on costs.
  • Supply chain diversification, particularly in AWS.
  • Strategic forward inventory buys.

1. Tariffs and Potential Impact on Consumer Prices

  • The interview begins with a discussion about tariffs, particularly concerning goods manufactured in China and sold on Amazon.
  • The interviewer asks how Amazon is thinking about the tariff position, given that a large portion of sellers and manufacturers on Amazon produce in China.
  • Jassy acknowledges the uncertainty surrounding tariffs and emphasizes Amazon's focus on maintaining a positive customer experience by offering a wide selection and keeping prices low.

2. Amazon's Strategy to Mitigate Tariff Effects

  • Amazon is taking steps to mitigate the potential impact of tariffs on consumers.
  • Strategic Forward Inventory Buys: Amazon has engaged in strategic forward inventory buys of certain items at lower prices to protect customers from potential price increases.
  • Negotiating Terms: Amazon is working to negotiate favorable terms with suppliers to make it easier for customers to access affordable products.
  • Supply Chain Diversification: Amazon has diversified its supply chain, particularly in its AWS business, to reduce reliance on any single country for components. This diversification began about five years ago.

3. Consumer Behavior and Early Observations

  • The interviewer raises the question of whether consumers are pulling forward purchases in anticipation of price increases due to tariffs.
  • Jassy acknowledges anecdotal evidence of some consumers buying ahead but notes that it's too early to determine if this is a significant trend or a short-term anomaly.
  • He states that, so far, Amazon hasn't seen any meaningful change in consumer behavior.

4. Cost Absorption and the Role of Third-Party Sellers

  • The interview explores who will ultimately bear the costs associated with tariffs: consumers, Amazon, or third-party sellers.
  • Jassy predicts that sellers will likely try to pass on the costs, as many operate with limited profit margins.
  • He emphasizes that it's still early to determine how the situation will play out.

5. Supply Chain Diversification in AWS

  • Jassy highlights Amazon's efforts to diversify its supply chain, particularly in the AWS business.
  • He notes that finished goods with any degree of complexity typically have components from all over the world.
  • AWS has significantly diversified its supply chain over the past five years, sourcing components from various countries to reduce dependence on any single source.

6. Data Centers and Component Sourcing

  • The interviewer inquires about the impact of tariffs on Amazon's investments in data centers, given that components come from China and other countries.
  • Jassy reiterates that Amazon sources components from all over the world and has been actively diversifying its supply chain.

7. Notable Quotes

  • "We're going to try and do everything we can to keep prices as low as possible for customers." - Andy Jassy, emphasizing Amazon's commitment to affordability.
  • "Every finished good that has any degree of complexity in it has parts from all over the world." - Andy Jassy, highlighting the global nature of supply chains.
  • "I'm guessing that sellers will pass that cost on." - Andy Jassy, predicting how third-party sellers will respond to tariff increases.

8. Conclusion

  • The interview provides insights into Amazon's strategies for navigating the complexities of tariffs and their potential impact on consumers.
  • Amazon is focused on mitigating price increases through strategic inventory management, supplier negotiations, and supply chain diversification.
  • While it's still early to assess the long-term effects of tariffs, Amazon is committed to maintaining a positive customer experience and keeping prices as low as possible.

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