Amazon has grown dramatically over the past decade, surpassing 1.5 million employees and extending its reach into nearly every corner of commerce and society. Now, the turbulent economy is forcing the tech giant to make a series of difficult decisions, cutting back in some areas while making strategic bets in others.
It’s far from alone in facing these decisions. However, with its reach across e-commerce, physical retail, cloud computing, robotics, AI, transportation, logistics, and many other areas, Amazon is a microcosm of the larger economy. That makes it worth examining not just for its own future but for the broader implications.
On this episode of the GeekWire Podcast, we take a closer look at the forces influencing Amazon’s business, and how the company is responding.
Listen below, and continue reading for more.
Amazon is significantly slowing its employment growth. The company’s decision to pause hiring for corporate roles for the next few months is the latest example of efforts to keep its headcount in check.
The economy is taking its toll on Amazon’s financial position.
- Profit was down 43% to $1.8 billion in the third quarter after adjusting for a gain on the company’s investment in electric vehicle maker Rivian Automotive.
- The company’s market value has fallen to less than $1 trillion for the first time in more than two years, amid broader declines in the stock market.
Amazon’s industry-leading cloud business isn’t immune to the effects. Amazon Web Services posted its slowest year-over-year quarterly revenue growth (27%) since the company started breaking out its cloud results, and its lowest increase in quarterly operating profit (11%) in three years.
The company is betting on long-term cloud, Prime and e-commerce growth.
- Amazon is helping cloud customers optimize their AWS usage to save money, taking a hit on its bottom line in the short term with the goal of maintaining their long-term loyalty.
- It’s also spending big on Prime Video with Thursday Night Football and The Rings of Power, attempting to boost Prime memberships in line with its broader business goals.
- With its recent Prime Early Access Sale, the company demonstrated its willingness to accept lower e-commerce profit margins in the short run in the interest of long term growth and loyalty.
Amazon has already cut back or discontinued operations in several areas.
- Bookstores: Amazon will close bookstores, 4-star and Pop Up retail outlets.
- Heathcare: Amazon Care to shut down. (It’s still acquiring One Medical.)
- Logistics/deals: End of the road for Treasure Truck.
- Virtual tourism: Amazon to Shut Down ‘Explore’ Virtual Tour Product.
- E-commerce: Amazon shuts down online store Fabric.com in move to cut costs.
- Robots: Amazon Abandons Home Delivery Robot Tests. (It’s still buying iRobot.)
The economic headwinds are shaping up as the biggest test yet for Amazon CEO Andy Jassy, requiring him to grapple with decisions that founder Jeff Bezos didn’t face. Ultimately, Jassy’s legacy will be determined not by what he cuts but what he builds, and whether Amazon can find its fourth pillar amid all this turmoil.
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