New York, San Francisco The world’s largest online retailer Amazon is facing a turning point. The layoffs of more than 10,000 employees are to be announced in the course of these weeks, as the US media “New York Times”, Bloomberg and “Washington Post” unanimously report. In the days before, the technology companies Meta, Twitter and Salesforce had announced that thousands of jobs would be cut.
According to the reports, office jobs in particular are to be eliminated at Amazon. The focus should be on reducing jobs in Amazon devices such as the smart speaker Echo and other products with the voice assistant Alexa. Furthermore, staff in the trading area and in the human resources department are to be reduced. The cloud division AWS should be less affected by cuts.
Especially in logistics such as parcel delivery or warehouses, Amazon employs many people who are paid on an hourly basis. Employees often only work there for a few months before they resign. Amazon can therefore reduce staff in this area without giving notice of termination.
Between April and September, Amazon had already cut more than 80,000 jobs, according to the annual report. The New York Times reported that the cuts were mainly in the logistics area.
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So far, however, Amazon had needed a lot of staff, especially in the important holiday season at the end of the year, and had also done the most important business in online trading. After the Thanksgiving holiday, Amazon organizes “Cyber Monday”, the largest online shopping event in the USA. In Europe in particular, business around the Christmas holidays is particularly important.
This year, however, the holidays could be weaker than ever for Amazon. CFO Brian Olsavsky had warned analysts: “We recognize that there are various factors taking a toll on people’s wallets and we’re not sure how much holiday spending will be compared to last year.” In the sales forecast for the final quarter of this year, Amazon assumed growth of around two percent compared to the same period last year. Analysts had expected much more.
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During the corona pandemic, Amazon had massively expanded its business. When shops had to close due to contact restrictions, Amazon made unprecedented sales in online trading. During this time, the company doubled its workforce.
Amazon invested heavily in new data centers, offices, warehouses, logistics centers and other projects such as new delivery trucks. Capital spending jumped from just under $17 billion in 2019 to $66 billion in the first nine months of this year alone.
In July 2021, founder Jeff Bezos handed over the CEO post to Andy Jassy. He had set up Amazon’s cloud spare. However, investors were skeptical about the course under the new CEO. Since Jassy took over the helm of the company, the company has lost around $1 trillion in market cap.
It is a positive signal if Jassy should now look more closely at the company’s costs, said analyst Brian Nowak from the major bank Morgan Stanley. The number of 10,000 positions available is more of a symbolic size given the high number of employees at the company.
But Jassy could now concentrate more on Amazon’s core business, Nowak suspected. The Amazon CEO could reduce other bets such as Alexa, the satellite company Kuiper, the subsidiary for self-driving cars Zoox, computer games or the health sector. Those “bets” currently cost $10 billion to $15 billion, Nowak estimated.
Amazon’s possible layoffs come just weeks before the important holiday season. They show just how badly the Seattle e-commerce giant has been impacted by the slowing economy. This was also shown by the disappointing quarterly results, which sent the share price plummeting.
Amazon had expanded and invested massively during the pandemic. But now business has collapsed faster than expected. After Twitter and Facebook parent Meta, Amazon is the third tech company planning layoffs in the last few weeks. A request to Amazon went unanswered as of the publication of this article.
The 10,000 jobs represent 3 percent of the US office workforce and less than 1 percent of the 1.5 million workers worldwide. Just earlier in the year, Amazon had boosted pay for its tech workers in an effort to keep them. Now they too could be affected by the layoffs.
On the occasion of the quarterly figures, CFO Olsavsky explained that Amazon was feeling the effects of inflation and warned that growth would slow down significantly. The otherwise always lucrative cloud division has also weakened recently because corporate customers are also acting more cautiously in the uncertain environment.
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As a result, the share price collapsed by around a fifth. On Monday, too, the share price lost value again after a recovery in the past week. At around $99, the price is well below the high of $183 the stock reached during the pandemic.
Various new business areas such as physical stores and health services have also not brought the hoped-for success – just like the low-margin Alexa speakers, which according to the New York Times did not deliver the hoped-for additional purchases.
Amazon had originally expected that more customers would also order verbally and not just have their favorite music played or ask about the weather. Internally, this division has therefore long been considered a possible target for cost savings.
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