Amazon sheds staff but not so much in logistics

Amazon is reducing the size of its workforce by 18,000 people. Widely reported in the press but apparently not formerly reported to investors, the e-retailer’s CEO, Andy Jassy, seems to have made the announcement in a blog post to his staff. He stated that the planning review for the year had “been more difficult given the uncertain economy and that we’ve hired rapidly over the last several years. In November, we communicated the hard decision to eliminate a number of positions across our Devices and Books businesses….Between the reductions we made in November and the ones we’re sharing today, we plan to eliminate just over 18,000 roles”.

As Andy Jassy mentioned, Amazon had already indicated in November that it needed to reduce its head count by around 10,000 due to under utilisation of capacity. However, the present message is not just more pessimistic in terms of the number of people who will lose their jobs but also focusses on parts of the business other than the logistics infrastructure. It seems that most of the job losses will be Amazon Stores, the ‘People, Experience, and Technology’ organization and the ‘Devices and Books business’. The clear indication is that Amazon had hired too many people.

However, from the perspective of logistics, this consolidation should not be over-done. Although Amazon has been rationalising some of its networks and even selling-off some property, it is still expanding its fulfilment centres and transport resources. Indeed, it is noticeable that Andy Jassy does not mention logistics in his identification of parts of the business that will lose staff. Perhaps as far as logistics is concerned, it is more accurate to suggest that Amazon is re-calibrating its rate of expansion.

What is clear is that activity in the e-retail sector generally has fallen back, with FedEx’s CEO estimating that online retail spending in the US has fallen from a height of 22% in 2021 to around 18% of total retail spending. It appears that Amazon is able to absorb this, with organic growth sustaining asset utilisation in its logistics infrastructure. However, others might not be so lucky.

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