Amazon will start the largest layoffs in history

People familiar with the matter said, retail giant Amazon plans to lay off about 10,000 employees as early as this week, which will be the largest layoff in the company's history.

The layoffs will be concentrated in Amazon's devices division, which includes voice assistant Alexa, as well as in its retail division and human resources, the people said. The number of layoffs remains fluid and may be done team-by-team rather than simultaneously company-wide. But if the layoffs were around 10,000, it would represent about 3 percent of Amazon's full-time workforce, or even less than 1 percent of its global workforce.

Amazon reported a workforce of 798,000 at the end of 2019. But as of December 31, 2021, the number of full-time and part-time employees was 1.6 million, an increase of 102%, although mainly hourly workers.

The holiday shopping season is critical for Amazon, and the company typically increases its workforce during the quarter to keep up with demand. The layoffs over the holiday shopping season show that the deteriorating global economy is putting enormous pressure on Amazon to slash operations that have been overstaffed or under-delivered for years.

Amazon will be the latest tech company to be forced to lay off workers, which until recently struggled to retain employees. The e-commerce giant more than doubled the cap on cash compensation for its tech workers this year, citing "particularly competitive labor markets."

Changing business models and an unstable economy have triggered layoffs across the technology industry. After buying Twitter, Elon Musk this month cut the company's workforce by 80%. Last week, Facebook parent company Meta announced that it would lay off 11,000 people, or about 13% of its workforce. Technology companies including Lyft, Strip, and Snap have also laid off workers in recent months.

The new crown pneumonia epidemic has created Amazon's most profitable era in history, as consumers flock to online shopping and businesses use Amazon's cloud computing services. Amazon doubled its headcount in two years and reinvested profits into expansion and experimentation in search of the "next big thing."

But earlier this year, Amazon’s revenue growth slowed to its slowest pace in 20 years as the pandemic accelerated. The company has faced high cost pressures from overinvestment and rapid expansion while changing consumer shopping habits and high inflation have dented its sales.

Amazon's performance experienced a slight rebound in the third quarter of this year. But the company warned investors that growth could weaken again, possibly falling to the lowest level since 2001.

Amazon said the company has tightened its belt in the past and may do so now. Amazon laid off 1,500 workers during the dot-com bust in 2001, including hourly workers, who accounted for 15% of its workforce at the time. The company laid off hundreds of full-time employees in early 2018 after another period of rapid expansion.

Amazon executives met with institutional investors last week to reassure them, according to three people familiar with the matter. Amazon has lost $1 trillion in market value since Andy Jassy took over as chief executive last year.

Jassy, ​​who previously ran Amazon's lucrative cloud computing business, has been keeping tabs on the business to cut costs quickly. Initially, he pulled back on plans for a warehouse expansion that had been overextended during the pandemic, before gradually expanding to other parts of the company.

Amazon has also shuttered or scaled back some programs in recent months, including Amazon Care, which provided primary and emergency medical care but failed to find enough customers, Scout, a delivery robot, and Fabric.com, a 30-year-old subsidiary that sells sewing supplies. From April to September, Amazon laid off nearly 80,000 people, mainly through natural attrition to reduce the number of hourly workers.

Amazon froze hiring for several smaller teams in September. In October, the company stopped filling more than 10,000 open positions in its core retail business. Two weeks ago, Amazon announced a hiring freeze across the company, including its cloud computing division, for the next few months. The news came so suddenly that recruiters hadn't received a revamped interview guide for job seekers until recently, it is understood.

Cowen & Company analyst John Blackledge, who has covered Amazon for a decade, said his calculations show Amazon's core e-commerce business is losing billions of dollars this year.

He said, they need to do a deep self-examination and the current model is not sustainable.

Amazon's devices division has long been at risk of layoffs. As Amazon works to build a leading voice assistant, Alexa and related devices quickly become the company's top priority. Amazon leadership believes that voice assistants could replace phones as the next essential consumer interface.

From 2017 to 2018, Amazon doubled its staff on the Alexa and Echo smart speaker teams to 10,000 engineers. The company has sold hundreds of millions of Alexa-enabled devices. But those products tend to have thin margins, and other potential revenue streams, such as voice shopping, have yet to catch on, Amazon said.

The Echo and Alexa businesses lost about $5 billion in 2018, according to people familiar with the matter. This fall, Amazon was noticeably more restrained than it has been in years past when it launched new devices at its launch event. In the past, Amazon has come out with a lot of ridiculous products, like sticky note printers and $1,000 home robots.

Amazon's retail business, which covers brick-and-mortar and online retail as well as logistics, has been under enormous pressure after surging demand and rapid expansion during the pandemic. The company has pulled back on expansion plans, telling investors it sees uncertainty in the consumer space.

Amazon Chief Financial Officer Brian Olsavsky told investors last month, we've recognized the reality that people's wallets are being weighed down by a variety of factors. The company wasn't sure. where consumer spending is going, but "we're already prepared for a variety of outcomes.

Amazon's disappointing third-quarter results in October spooked investors and sent shares down more than 13%. This marks the first time Amazon's market capitalization has fallen below $1 trillion since April 2020. The sell-off against Amazon stock continued for days after the earnings report, erasing nearly all of the stock's gains during the pandemic.

Amazon shares are down about 41% this year, outpacing the S&P 500's 14% drop and on track for its worst year since 2008.