In the largest layoffs in Amazon's almost three decades of doing business, the company said yesterday it plans to cut about 10,000 jobs as it prepares for a possible recession and deals with a post-pandemic reduction in its e-commerce business.
The 10,000 number - which is said to be "fluid" and dependent on final decisions - would be roughly three percent of the company's corporate headcount or less than one percent of its global workforce of more than 1.5 million.
"The layoffs, which could begin as soon as this week, will likely target Amazon’s devices group, responsible for the Echo smart speakers and Alexa digital assistant, as well as Amazon’s retail divisions and human resources, according to people familiar with the matter.
"Teams are making the decisions on where to reduce headcount as part of the company’s annual planning process, said the people, who requested anonymity to discuss a confidential matter.
"Chief Executive Officer Andy Jassy has vowed to streamline operations amid slowing sales growth and economic uncertainty. Last month, the Seattle-based company predicted that the holiday sales period would be the slowest in its history, spooking Wall Street and tanking the shares.
"Some longtime Amazon employees, also speaking on condition of anonymity to discuss an internal matter, said the cost-cutting in the last few months has been the most severe they’ve ever experienced."
From the New York Times:
"Amazon’s planned retrenchment during the critical holiday shopping season — when the company typically has valued stability — shows how quickly the souring global economy has put pressure on it to trim businesses that have been overstaffed or underdelivering for years.
"Amazon would also become the latest technology company to lay off workers, which only recently it had been fighting to retain. Earlier this year, the e-commerce giant more than doubled the cap on cash compensation for its tech workers, citing 'a particularly competitive labor market.'
"Changing business models and the precarious economy have set off layoffs across the tech industry. Elon Musk halved Twitter’s head count this month after buying the company, and last week, Meta, the parent company of Facebook and Instagram, announced it was laying off 11,000 employees, about 13 percent of its work force. Lyft, Stripe, Snap and other tech firms have also laid off workers in recent months."
From the Wall Street Journal:
"The latest plan by Amazon shows the extent to which the company is determined to rein in costs as it prepares for economic uncertainty, although it is also entering a holiday period that is typically when it makes most of its sales for the year.
"While Amazon has hired at its warehouses to prepare for the fourth quarter, executives have warned that they would be cautious in how they hire. Chief Financial Officer Brian Olsavsky last month said Amazon has seen signs of consumers being affected by high inflation, and the company warned of a difficult fourth quarter financially … Amazon previously said it determined that there are some areas where certain roles are no longer necessary and has worked in those cases to help staff members find new roles. Amazon has reported a total of $3 billion in net losses for the first nine months of this year, after posting net income of about $33 billion in 2021 and $21 billion in 2020.
"Amazon last underwent an extensive profitability push in 2017 under Mr. Bezos. Senior Amazon executives say Mr. Jassy’s review is much more extensive. Mr. Jassy has been focused on profits since taking over last year, and has presided over tough decisions."
And from the Washington Post (which is owned in a private investment by Amazon's founder-chairman, Jeff Bezos):
"After years of staggering growth, the tech sector — a favorite with investors — is on wobbly ground. The recent spate of layoffs follows months of warning signs, including tech start-ups finding it more difficult to raise capital … Amazon in particular has been in expansion mode for most of its history, from launching its Prime memberships to pioneering cloud computing to buying upscale grocery chain Whole Foods. The company, which brought in $469.8 billion in sales last year, said this summer it would buy health-care chain One Medical for $3.9 billion."
The Post writes that the planned job cuts "represent a remarkable turnabout for Amazon, which has hungrily hired tens of thousands of employees in its warehouses and corporate offices in the past decade. The company had more than 1.5 million employees at the end of September, a 5 percent increase from the year before."
The Post also has a chart that vividly puts the Amazon cuts in content: one percent of its total global workforce, compared to Netflix's cuts of four percent of its workforce, Lyft's 13 percent cuts, Meta's 13 percent cuts, Snap's 20 percent cuts, and Twitter's 50 percent cuts.
BREAKING NEWS: Ironically … even as Amazon announces the layoffs, it also is introducing a new program called Amazon Clinic, which it describes as "a message-based virtual care service that connects customers with affordable virtual care options when and how they need it - at home, after dinner, at the grocery store, or on the go - for more than 20 common health conditions, such as allergies, acne, and hair loss." Amazon Clinic, the company says, will operate in 32 states and reflects its belief that "improving both the occasional and ongoing engagement experience is necessary to making care dramatically better. We also believe that customers should have the agency to choose what works best for them. Amazon Clinic is just one of the ways we’re working to empower people to take control of their health by providing access to convenient, affordable care in partnership with trusted providers." It is, Amazon says, part of its health care continuum that includes Amazon Pharmacy and One Medical, "two key ways we’re working to make care more convenient and accessible." At the moment, however, it will not take insurance.
- KC's View:
Let's keep the numbers in context.
Amazon increased its total labor headcount by five percent over the past year, and now is reducing it by either three percent or less than one percent, depending on how you calculate the number. In essence, then, Amazon is moving in the direction of getting back to pre-pandemic labor numbers, just as it has been reducing its physical footprint in terms of distribution centers as demand tails off in a post-Covid world.
It will be interesting to see how this impacts Amazon's innovation initiatives. (That's one of the things that Tom Furphy and I will be talking about in "The Innovation Conversation" tomorrow.) My suspicion is that for the most part, it won't have an enormous impact on innovations to which Amazon is committed - sometimes leaner is better. What may be revealed in the process is what innovations Amazon does not see as critical to its growth.
Keep a couple of things in mind. Amazon has to meet certain growth targets; the markets demand it. And Amazon will continue to invest in businesses that can deliver on those targets. I would expect healthcare and food to be among the industries where Amazon believes that it can continue to disrupt and deliver on its customer-centric agenda.
That said, is it possible that Amazon could sell Whole Foods? Sure. Anything is possible … and there weren't many of us who saw the Kroger-Albertsons deals coming. But I actually think Amazon would be better off finding one great grocery executive who could find synergies in all its various food-oriented businesses, identify an across-the-board value proposition that is easily and effectively communicated to shoppers, and build morale and esprit de corps among employees. (I keep saying that Andy Jassy should call me for some ideas, but he hasn't done it yet. C'est la vie.)