I read all 22 Amazon Shareholder letters. 

I wanted to understand how Amazon used machine learning to drive the customer experience. Here's what I learned.

Amazon is a Platform-as-a-Service (PaaS) company that just happens to be a retailer

Jeff Bezos has been consistent about Amazon's goal since the beginning - deliver an amazing customer experience. That means providing vast selection, fast convenience, and price reductions. Amazon has invested in building massive platforms, whether it's fulfillment or cloud computing centers, to support the pillars of selection and convenience. The last pillar, price reductions, is a result of the efficiencies from scaling. 

Here's their playbook: (a) create a platform for their own business needs (b) formalize this platform into an ecosystem by opening it up to 3rd-parties (c) refine this platform into a self-service option that's easy-to-use with an interface. Lather, rinse, repeat. 

Read more

Well, this is new.

Retailers have blamed bad weather for poor sales before, but I don't think I've ever seen a retailer blame bad algorithms.

Loblaw Companies Ltd, Canada's largest grocery and pharmacy chain, which owns the mainstream brand Loblaws and discount brand No Frills, had a soft Q2 performance with same-store revenue growing 0.6%. Their President, Sarah Davis, blamed the performance on algorithms that prioritized increasing profit margins instead of promotional pricing to attract foot traffic. That is, Loblaw chose to increase the revenue from each customer instead of focusing on increasing the number of customers. She says:

We know exactly what we did and what we did was we focused on going for margin improvements...And in the excitement of seeing margin improvements in certain categories as we started to implement some of the algorithms, people were overzealous...You end up with fewer items on promotion in your flyer. 

Read more