As the saying goes, what goes up, must eventually come down. And based on recent developments, it would seem the tech industry is coming to terms with this reality. During the pandemic, most technology companies enjoyed tremendous boosts in revenue. Consumers subscribed to streaming services, shifted to e-commerce and online shopping, and worked out virtually. But this all came to an abrupt end this past year, and tech firms across the board seem to be feeling the pinch. Many companies are considering tech-linked job cuts, and among them is the retail giant, Amazon. According to recent reports, Amazon is expected to have about 10,000 employee layoffs in the coming months.
Amazon looks to be one of many companies looking to cut costs through tech-linked job cuts. Others, like Facebook, Lyft and Stripe, have made similar decisions to pursue employee layoffs amidst a less favorable consumer climate. But these are not the only cutbacks that Amazon is choosing to make. In fact, the company is making a number of shifts in different areas beyond staffing. These changes simply reflect a need to adapt to changing times and unfulfilled expectations. And it also shows that sometimes companies must pull back in order to grow and excel.
“As we’ve gone through this, given the current macro-economic environment, as well as several years of rapid hiring, some teams are making adjustments, which in some cases means certain roles are no longer necessary.” – Kelly Nante, Amazon spokesperson
Employee Layoffs at Amazon
According to reports by numerous outlets, Amazon plans to pursue about 10,000 employee layoffs in different areas. The highest percentage of cutbacks will involve staff involved in the company’s devices sector. Specifically, it seems Amazon has made a decision to reduce investments in voice assistants like Echo and Alexa. These devices and others like them have been low-margin offerings from the start. In addition, voice shopping in general has not caught on among consumers, resulting in significant losses in these areas. In 2018 alone, it was reported that Alexa and Echo divisions lost about $5 billion. Thus, it’s understandable why the company is pursuing tech-linked job cuts in this area.
But employee layoffs extend beyond Amazon’s devices organization. Other major areas seeing staff cutbacks include its retail division and its human resources department. The pressures facing its retail division are several with one of the more notable ones being reduced consumer shopping. The effects of a sluggish economy and growing inflation has meant fewer customer purchases overall. But the bigger issue relates to overinvestments in retail growth during the pandemic. When e-commerce and online shopping boomed, Amazon invested in expansion aggressively. In fact, it doubled its warehousing space in two years. But with contraction in retail sales as of late, it has become clear that the expansions were excessive. Therefore, tech-linked job cuts in these areas are also going to take place.
The other major area of employee layoffs for Amazon involves its human resources department. While these positions don’t reflect tech-linked job cuts per se, they highlight the fact that fewer tech positions are needed. It is interesting that less than a year ago, the demand for tech talent exceeded supply. In response, Amazon doubled its cap for cash compensation for tech workers in order to recruit the best and brightest. But that has since changed rapidly as growth is less robust and fewer workers are needed. This plus a need to trim costs naturally means that fewer HR workers will be needed in the short-term. It’s therefore of little surprise Amazon is announcing employee layoffs here as well.
“After a deep set of reviews, we recently decided to consolidate some teams and programs. One of the consequences of these decisions is that some roles will no longer be required.” – Dave Limp, SVP of Devices & Services, Amazon
Other Areas of Tech-Linked Job Cuts
The departments and divisions at Amazon where employee layoffs will occur involve those just mentioned. But Amazon is also choosing to curb some other projects as well in an effort to cut expenses. One of those projects is its Amazon Care, which was being developed to provide primary and urgent care health services. Another key project involved Amazon Scout, a small, box-sized home delivery robot in which the company had been investing. Amazon has also decided to reduce investments in its subsidiary, Fabric.com. This sewing supply company may also be subject to employee layoffs in the future.
Certainly, employee layoffs that involve 10,000 people will make headlines. But this figure reflects only 3% of Amazon’s total corporate staff and less than 1% of its global workforce. This is much less profound when compared to Meta’s recent layoffs involving 13% of its company. But Amazon’s upcoming layoffs also do not tell the entire picture. Between April and September of this year, Amazon reduced its workforce by 80,000 employees through attrition. This was then followed by a freezing hire last month. Amazon had hoped to avoid actually letting staff go, especially tech-linked job cuts. But as is now evident, the pressures to do so just became too high.
“We’re realistic that there’s various factors weighing on people’s wallets. We’re ready for a variety of outcomes.” – Brian Olsavsky, CFO of Amazon
Adapting to the Environment
When tech companies enjoyed tremendous windfalls during the pandemic, many chose to leverage earnings toward investments. Amazon was naturally one of those companies. Now, as the tech sector experiences a readjustment, additional shifts must be made. Understanding this, it’s important to acknowledge that employee layoffs are not necessarily an indication of failure or poor planning. In most instances, they’re simply a reaction to changes in the market that reflect wise strategies. This is the case involving tech-linked job cuts in many firms currently as they adapt to change. Certainly, Amazon would prefer not to lose key talent that might help them in the future. But at the same time, businesses just like plants must be occasionally pruned when the season calls for it. This is the best recipe for lasting growth, and Amazon is well aware of its necessity in the current climate.