As one of the biggest companies in the world, Amazon is quite familiar with being in the spotlight. Over the past month, however, it seems the eCommerce giant has been making headlines for all the wrong reasons. Now, it seems the company’s the company layoffs might be affecting over 20,000 employees instead of the 10,000 previously reported by The Times.
Why It Matters: Amazon’s eCommerce operations have been slowing considerably over the past month, a trend reflective of an ongoing crisis.
- Despite an increase of 15% in revenue during the third quarter of 2022, the company believes its profit for the first quarter could be $0.
- Reports now suggest that the extent of the layoffs could be twice as big, indicative of more trouble than originally thought.
- Amazon CEO Andy Jassy’s confirmation of the layoffs and unapologetic attitude after claiming “we knew we might be overbuilding” is reflective of a bigger problem in the tech industry.
A Troubled Year: 2022 hasn’t been a good year for tech giants in general but when it comes to Amazon, it has been especially unforgiven. Over the past month alone, Amazon has seen criticism for tricking customers, discriminatory startup stipends, anti-union retaliation, suspending employees with safety concerns, and many more.
- Earlier this year, the company had already faced criticism for poor work conditions resulting in the death of a 48-year-old employee. Billy Foister, the victim of a heart attack after being told he has just dehydrated, didn’t receive treatment for over 20 minutes.
- The company has been the target of antitrust lawsuits in locations like California, the United Kingdom, and the District of Columbia.
- Early in November, Amazon broke a record by becoming the first company in the world to lose over $1 trillion in market value. Amazon’s stock poor performance has been fueled by controversy, poor revenue projections, and difficulties in other lines of business.
A Widespread Issue: Tech layoffs have not only affected companies like Twitter, Meta, and Amazon but also startups all over the world. According to Layoffs.fyi, a website that has been tracking tech layoffs since the start of the COVID-19 pandemic, over 144,000 employees have been laid off in 2022.
- November was the worst month of the year with over 51,000 employees being fired across 203 companies.
- Stanford Graduate School of Business Professor Jeffrey Pfeffer says the effects of the layoff would extend beyond their economic impact. According to the scholar, not only do “Layoffs literally kill people” but they also have proven ineffective at improving company performance.
- The reality of a possible tech recession, valuations bubble, and overhiring can’t be denied. However, according to Pfeffer and other experts, layoffs are not motivated by sound economic principles but by imitative behavior.
Startups Are Not Safe: While big companies might be basing their decisions to lay off thousands of employees on limiting others, pressure to do so is mounting is increasing in the startup world. With VC investments at a two-year low and investors calling for cost reductions, startups are finding themselves against the wall.
- VCs have been advising startups to reduce costs and freeze hiring as fears of a recession continue to grow. During Slush, Sequoia Capital partner Doug Leone’s advice to founders was “You have an opportunity to pass 10 cars. Do not waste a good recession.”
- While CEOs like Klarna’s Sebastian Siemiatkowski have declared themselves “lucky” for laying off 10% of the company’s workforce back in May. According to the Swede, having done so at a later date would have proven disastrous for the fired employees.
- Some founders like Julian Teicke, CEO of Wefox, have taken a different approach by slamming executives who see layoffs as an opportunity. He told CNBC: “I’m a little disgusted by statements like, ‘never miss a good crisis’ [or] ‘we have to cut the fat.’”
- While layoffs from big tech companies have dominated the news, startups account for most of the layoffs this year. According to Layoffs.fyi data, startup layoffs accounted for more than 75% of all the layoffs.