Here’s why experts believe Amazon is cutting back its workforce

Moving into the holidays, Amazon typically makes a bunch of hires, but these are unprecedented times™. The company has started laying off employees this week.

Cuts have been made to teams involving Amazon’s voice assistant, Alexa, and the New York Times reported that other cuts will come to its retail division, as well as human resources. The move comes as the Everything Store faces slowed growth and increased costs on top of over-hiring over the past few years, analysts told Retail Brew.

“What it needs to do now is tighten its belt to rebalance the equation and start making more money,” Neil Saunders, managing director of GlobalData, told Retail Brew. “And it’s therefore looking for areas where it can cut back—where it can trim without really affecting customer service.”

Amazon’s Q3 revenue grew 15% from $110.8 billion in 2021 to $127.1 billion this year, but that still fell short of analysts’ expected sales of $155.15 billion. During CEO Andy Jassy’s tenure, the company has aggressively cut costs where it can, including shutting down its telehealth service and closing 68 retail storefronts earlier this year.

• As one of the largest companies in the world, Saunders believes the layoffs, for Amazon, aren’t too worrisome from a bigger-picture perspective.
• Amazon did not return Retail Brew’s request for comment.

“Amazon has expanded enormously over the past few years, so this is a relatively small retrenchment,” he said. “But it is a significant one, because we’re used to Amazon expanding ad infinitum, and this is a break of that trend. It’s something very different.”

Competition heats up: Online and non-food categories are two areas struggling to keep up in the current retail environment, Sanders said. But other major players, like Home Depot and Walmart, are seeing promising signs and adjusting to consumer habits and expectations.

• The Home Depot’s 6% increase in Q3 revenue to $38.9 billion beat analyst expectations despite increased costs and inflation.
• Although widespread markdowns have slightly cut into Walmart’s profits, sales bumped up almost 9% on the back of its grocery business, which now has a higher-income clientele.

Walmart US CEO Doug McMillion told investors that part of the company’s e-commerce growth could be attributed to its app, which has evolved to include capabilities such as scheduling order pickups and skipping the line with its scan-and-go tech.

“Walmart will be better off than Amazon because traditionally…omnichannel shoppers are worth way more to a retailer than a regular consumer that just shops in one channel,” Suzy Davidkhanian, principal analyst at Insider Intelligence, told Retail Brew.

Circling back to Amazon, its biggest challenge moving forward will be to widen margins as the cost of delivering products to people’s homes remains high. Also, Amazon is no longer in a position where it can afford to throw money at different side quests to see what sticks, Davidkhanian said.

• “Gone are the days where its cash-cow divisions were helping with the ones that were just experimental,” she said. “The whole business world has changed, and they can’t afford to do that anymore.”

Zoom out: “Retailers are having to absorb some of the cost increases. They’re having to pass across increasingly generous discounts to stimulate the consumer,” Saunders said. “And those things don’t really stack up together very well. It means that there’s a margin crimp on the bottom line.”