Amazon Embarks On An Austerity Cure
Amazon Sends New Warnings About the Economy
The e-commerce giant is preparing for an uncertain economic environment in the coming months.
Amazon is determined to be well prepared to weather the sharp economic downturn on the horizon without a big scratch.
The e-commerce giant, which is one of the barometers of the health of the economy since it serves both households and businesses, seems to be putting its house in order in anticipation of the coming rainy days.
The monetary policy of the Federal Reserve (Fed) to crush inflation, which is at its highest in 40 years, is likely to cause a so-called hard landing of the economy aka recession.
The central bank is aggressively raising interest rates in hopes of stemming soaring prices for commodities and goods that are impacting consumers' purchasing power and increasing business inventories.
Many top economists, such as Harvard’s Larry Summers, say the economy is likely to enter a recession this year or next, thanks to the large interest-rate increases from the Federal Reserve.
The economy shrank 1.6% in the first quarter and 0.6% in the second.
Jamie Dimon, the CEO of JPMorgan Chase, has already lifted part of the veil on what is undoubtedly the outlook for the banks. He warned on Oct. 10 that the U.S. economy would likely enter "in some kind of recession six to nine months from now.”
Gone are the days of the pandemic that saw corporations thrive and especially tech groups because consumers were inundated with easy money via federal government stimuli.
Amazon Shuts Down Programs and Projects
Amazon was one of the big beneficiaries of this period of prosperity for the economy and the financial markets. But times have changed. The Seattle, Washington-based company has begun to tighten its belt, no doubt a sign that consumers have cut back on spending.
The group founded by Jeff Bezos, and now led by CEO Andy Jassy, has decided to end various projects, TheStreet has just learned. Two robotics projects - Canvas and Orca - have been terminated.
Amazon is also ending Aqua (Advanced Query Accelerator), a service linked to its AWS cloud computing division. Aqua enables Amazon to run up its cloud data warehouses faster by automatically boosting certain queries.
In addition, the firm has shut down Amazon Explore, a platform that allowed everyone to enjoy virtual experiences from the comfort of their home. Explore had been launched at the time of the pandemic, and operated via video feed, showing tour guides, instructors and personal shoppers delivering one-on-one sessions.
Amazon has neither confirmed nor denied the information.
“At Amazon we think big, experiment, and invest in new ideas to delight customers," Amazon's spokesperson Brad Glasser said in an emailed statement. "We also continually evaluate the progress and potential of our products and services to deliver customer value, and we regularly make adjustments based on those assessments.”
The stopping of these projects, which is part of a vast cost reduction plan, should result in job cuts. But some employees will move to other areas of Amazon, a source close to the matter told TheStreet.
Big Tech Layoffs
Amazon has recently embarked on an austerity cure aimed at saving money and preserving its profitability. The e-commerce giant froze corporate hiring in its retail division which includes online and physical stores, its marketplace for third-party sellers and Amazon Prime, its subscription service.
The hiring freeze is expected to last at least until the end of 2022. New openings will be available in 2023.
There were more than 10,000 job openings posted in the stores division at the time the freeze was announced.
Amazon has also discontinued Amazon Glow, a program for kids introduced in September 2021. Glow allowed kids to talk with and see family members remotely on an eight-inch screen while also reading stories, playing games and even creating art by means of a 19-inch touch-sensitive mat placed horizontally in front of the Glow device.
