We’ve made a number of really important adjustments in the business, has changed its profitability trajectory over the last year. And we really like where that’s headed and we’re expanding that meaningfully. But if you want to be really broad, you have to have a mass physical format. We have been working on that for several years with Amazon Fresh. And I would say that we weren’t pleased with the inputs, the progress on the inputs there. And the team has worked very hard over the last year to first start on the quality of the input, and that goes towards the quality of what we already had in place. And these are things like the right in-stock levels, the right cost structure, the right figures on things like obsolescence, just a number of the core inputs there, we just felt like we could be sharper and better.
And I think that team has made up a lot of improvements. We have spent a lot of time thinking and rethinking how we want the formats to look. And we’ve just started rolling out some of those new formats, starting in our Chicago stores and then moving to our Southern California stores shortly thereafter. And you see added selection. You see added private brands. You see added well-known third-party brands like Krispy Kreme in coffee in the stores. You’ve seen a refined decor in the stores. You see refined dash cards that keep a running tally for people so they understand where they are at the moment wherever they’re shopping, as well as refined self-service checkouts. And all those things, to me, are part of an effort we’re trying to pursue to have a format in our mass Amazon Fresh stores that resonate more with customers.
And we’re hopeful that we will find that format and that it gives us the type of results that give us confidence to want to expand more broadly. But we won’t expand unless we see that type of resonance. We’re not just going to be on discipline. We’re going to be thoughtful and disciplined about it. I do think also, you’re starting to see across the team pulling some of the efforts together. So we have a number of different grocery offerings that I just talked about, just having a converged shopping cart for customers, which they have obviously wanted that I think will help them quite a bit. We’re continuing to extend delivery to non-Prime customers as well. And so I think there are a number of opportunities for us over time to grow the business.
We’re optimistic that we’ll be able to do so, but we’re also being disciplined about not expanding the physical fresh stores until we have a format that we think is more resonant with customers.
Operator: And our next question comes from the line of Brian Nowak with Morgan Stanley.
Brian Nowak: I have two. The first one, Andy, on the last call last quarter, you talked about how you sort of talked about North America retail margins potentially getting to at or above pre-COVID levels. I think you said a margin around 4% and you’re sort of talking now about investing more in grocery and expanding same-day and expanding that footprint. How should we think about sort of the forward slope of North America retail margins and sort of invest in some of these new initiatives in the retail business? Then the second one on AI. How high of an investment priority is it for you to improve your own retail and device network through more AI investments, potentially through logistics or AI-based agents, et cetera? How large is that in the overall investment priority list?
