[Asia Economy Reporter Yujin Cho] Amazon, the largest e-commerce company in the United States that rapidly expanded during the COVID-19 pandemic, has finally initiated massive layoffs amid poor performance and recession concerns. This is the first large-scale reduction in workforce since its founding. Large-scale layoffs among big tech companies, which have hit growth limits due to stagnant demand, inflation, and prolonged supply chain disruptions adding cost pressures, are continuing one after another.
According to major foreign media such as The New York Times (NYT) and The Wall Street Journal (WSJ) on the 14th (local time), Amazon will begin restructuring approximately 10,000 employees as early as this week. This layoff is the largest since the company's establishment in 1994, and the total number of layoffs may be fluid, foreign media reported.
This measure is expected to primarily affect the technology, retail, and human resources sectors, as well as the device business including Alexa. WSJ reported that Amazon had already started layoffs of contract employees several weeks ago, and the current 10,000 layoffs include full-time employees.
As of the end of June, Amazon had a total of 1.5 million employees worldwide, including contract workers, so the number of employees being cut this time does not reach 1%. Amazon announced last month a hiring freeze in the retail sector and on the 3rd of this month extended the hiring freeze to other sectors.
Amazon’s current workforce reduction stems from cost pressures and recession concerns. Amazon posted a net loss of $3.8 billion (about 4.8 trillion KRW) in the first quarter of this year, marking its first quarterly loss in seven years, and shows no signs of recovery.
During the pandemic, Amazon’s core retail sector saw soaring performance and rapid expansion, but as the pandemic ended and government policies shifted to tightening, ongoing recession concerns have acted as a boomerang. According to WSJ, Amazon hired about 800,000 additional warehouse workers over two years from the end of 2019 to the end of 2021 during the pandemic.
The market is rapidly cooling, and prospects are not bright. Amazon posted results in the third quarter that met market expectations, but the fourth-quarter results are expected to fall significantly short of market forecasts. Amazon projected fourth-quarter revenue between $140 billion and $148 billion, well below the market estimate of $155.15 billion.
The worsening external environment, including inflation causing stagnant demand in the online shopping market, global supply chain disruptions, and recession fears, has increased cost pressures. Brian Olsavsky, Amazon’s Chief Financial Officer (CFO), warned, "There are signs that high inflation is starting to impact demand," adding, "It will be a financially tough fourth quarter." Amid the performance crisis, the stock price plummeted, and the market capitalization fell below the $1 trillion mark for the first time in 31 months.
Before Amazon, layoffs at major U.S. IT giants such as Meta and Twitter have been ongoing. Meta, the parent company of Facebook, which is suffering severe declines due to reduced sales, decided last week to cut more than 11,000 employees, equivalent to 13% of its total workforce. This is the largest layoff in Meta’s history since its founding in 2004.
Twitter, after being acquired by Elon Musk, CEO of Tesla, laid off 3,700 employees, half of its total workforce, and ride-hailing company Lyft also conducted massive layoffs, cutting 13% of its total employees. Apple, Google, and Microsoft (MS) have halted new hiring and are focusing on cost reduction.
In September, Google ordered about half of the 100 employees in its internal startup incubator 'Area 120' to transfer and find other jobs within the company within 90 days. MS also implemented layoffs in July, cutting less than 1% of total employees in each business unit as part of a "strategic realignment."
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