Jason Del Rey | Vox

Inside the battle for the future of Amazon

2023-02-03T12:24:05-05:00

Amazon CEO Andy Jassy is leading the company through one of its most turbulent periods. | David Ryder/Bloomberg via Getty Images

For years, it seemed as though nothing could stop Amazon’s explosive growth and success. Even a pandemic couldn’t slow it down: In fact, in early 2021, the tech and retail giant reported its largest quarterly profit ever.

But a lot can change in just two years: Since then, founder Jeff Bezos stepped down and named a new CEO, the online shopping boom slowed, and Amazon had to dig itself out of a costly and overly aggressive warehouse and staffing expansion. The past two months have been a strange, even frightening, time inside the company, current and former employees told Recode: Amazon announced unprecedented layoffs of more than 18,000 corporate employees and began culling areas of the business, like its Alexa voice assistant division, that Bezos had long championed.

As Amazon faces one of the most crucial crossroads in its nearly 29-year history, it’s dogged by a pressing question: Are the recent layoffs and cost cuts simply the sign of a company entering a new, unavoidable phase of maturity, or are they a warning flare that Amazon has plateaued and will soon start experiencing an eventual and irreversible decline?

“That’s what we are all asking ourselves,” a former Amazon marketing leader, who left the company in 2021, told Recode.

Only adding to the uncertainty are open questions about whether current Amazon CEO Andy Jassy, Bezos’s hand-picked successor, can lead the company through these trials without abandoning an internal culture that led to breakthrough innovations like Amazon Prime and Amazon Web Services that helped make the company successful in the first place.

The stakes of Amazon’s battle for its future are high — and it’s fighting at least partly against itself. The eventual answers to these questions matter not only to the millions of people across the globe who work for Amazon and its many partners in varied industries, but also to the hundreds of millions who rely every day on the company’s shopping, delivery, entertainment, and cloud computing services

Are you a current or former Amazon employee with thoughts or tips on this topic? Please email Jason Del Rey at jason@recode.net or jasondelrey@protonmail.com. His phone number and Signal number are available upon request by email.

Andy Jassy, Chief Cost-Cutter

For Amazon and its employees, 2022 served as a harsh wake-up call. And in 2023, the company and its employees will need to adapt to this new reality.

Even before Amazon’s stock began falling in April 2022 when the company revealed it had overexpanded and overstaffed its retail warehouse network, Jassy had started his new role as CEO in 2021 “laser-focused on profits” and with a plan to kick off in-depth profitability reviews.

The first significant cuts came to Amazon’s brick-and-mortar retail business in March 2022, when the company announced it would shut down dozens of bookstores across the US and UK, as well as a handful of stores called 4-Star that sold an array of best-selling merchandise from Amazon’s online store. The shops were not expensive to operate compared to the company’s high-tech convenience stores called Amazon Go, but they never created enough differentiation from competitor shops to justify their existence.

Then came a news report in November, saying Amazon would soon lay off more than 10,000 corporate employees — a shocking number for a company that hadn’t had any corporate layoffs of more than 1,000 people since 2001. In the fall, the company also began rescinding some job offers, sometimes just a couple of weeks from would-be employees’ scheduled start dates. And at the start of 2023, Jassy clarified that employee cuts would go even deeper: More than 18,000 roles would be axed — around 5 percent of the company’s corporate staff, but by far the largest total number of job cuts in its history. To put the abruptness of these changes in context: As recently as June 2022, Amazon’s career site had listed more than 30,000 job openings — that’s not a misprint — in software development positions alone. But by mid-January, it only had fewer than 300.

The prolonged layoff cycle caused panic and low morale inside the divisions of Amazon corporate targeted in the cuts. Some workers told Recode in November that they were questioning whether they wanted to stay at the company even if they weren’t axed. They also are questioning what the future of Amazon will be: Will it learn how to innovate again and continue to delight customers, or will it slide into maintenance mode?

In the past, after all, Amazon leaders would bristle at the idea of Amazon being pigeonholed with labels such as “retailer”; to them, Amazon has always been an innovation company with inventions like the Kindle e-reader, Amazon Prime, Amazon Web Services, and Alexa as proof. But it’s been a long time since Amazon has blown the public away with a new product or service. Alexa debuted all the way back in 2014, and that division was hit with some of the deepest cuts in the fall.

Jassy has tried to reassure employees that innovation is still a main focus for Amazon: “We often talk about our leadership principle Invent and Simplify in the context of creating new products and features,” he wrote in a company blog post in early January. “There will continue to be plenty of this across all of the businesses we’re pursuing.”

But he also made a point to reframe the definition of innovation to include more mundane business changes: “[W]e sometimes overlook the importance of the critical invention, problem-solving, and simplification that go into figuring out what matters most to customers (and the business), adjusting where we spend our resources and time, and finding a way to do more for customers at a lower cost,” Jassy wrote.

Such a change is perfectly natural for a massive company in a transitional stage like Amazon is, according to Mark Cohen, the director of retail studies at Columbia University who was previously the CEO of multiple department store chains in the US and Canada.

“It’s completely unrealistic for the company to continue to invest in innovation at a breakneck pace while it rightsizes its house,” he told Recode. He also called the cost-cutting exercise “a perfectly reasonable thing to do for a company that is doing several hundred billion dollars in revenue and that has grown meteorically.”

What happened to frugality?

Indeed, Amazon’s current predicament has been startling to many because of the financial results the company was posting in recent years. Before the pandemic, in 2019, Amazon’s revenue grew more than 20 percent year over year to more than $280 billion – an impressive rate of growth for a company of that massive size. In 2020, revenue growth skyrocketed to more than 38 percent, fueled by the e-commerce boom during the early months of the pandemic. Total revenue surpassed $386 billion.

With numbers of that size, it’s easy to lose sight of the sheer absurdity of that kind of growth. Amazon added $106 billion in new revenue to its business in a single year, 2020. For comparison’s sake, the giant discount retailer Target generated just over $92 billion in revenue during that same timeframe. Amazon added an entire Target worth of business, plus a Dick’s Sporting Goods for good measure.

In 2021, as people began returning to their pre-pandemic shopping habits, Amazon’s revenue growth decelerated to 22 percent with nearly $470 billion in revenue. And in the first nine months of 2022 (Amazon reports results for the final quarter of 2022 the first week in February), year-over-year revenue growth decelerated all the way to 10 percent. To make matters worse, Amazon’s core retail business lost more than $8 billion during that time frame, compared to an $8 billion profit during the same period the previous year. Jassy decided Amazon’s layoffs and cuts had to follow.

In conversations with 10 current and former Amazon senior managers and executives, the latter of which all left in either 2021 or 2022, there was a general consensus that a greater focus on managing costs should have come sooner for Amazon, even before the challenges that Covid-19 and a turbulent economy created for the company. The current employees were granted anonymity because they are not permitted to speak to the press without Amazon’s permission, and the former company leaders requested it so they could talk candidly. In recent years, many of these sources told Recode, ideas for new products and services were not being evaluated with the same rigor and frugality that Amazon was known for. Some blamed an influx of external middle-management hires over the last five or so years, whom they say Amazon leadership didn’t work hard enough to mold. Others argued that a corporate culture sometimes criticized as soulless and too harsh had over time moved too far in the opposite direction.

“I’ve seen the transition to where you had to sugarcoat feedback,” one longtime senior manager told Recode.

Amazon’s launch of a live radio app called Amp was one of the more questionable new product forays. At the time the app launched in early 2022, the most recent top innovator in the live audio space, an app called Clubhouse, was already in decline. While the two apps are not identical, some employees believed Amazon should have foreseen the slowdown in the overall live audio space. Not surprisingly, Amazon reportedly laid off half of Amp’s staff in October.

Other longtime execs told Recode that besides greenlighting and overfunding too many ideas, Amazon no longer pulls the plug on bad ideas as quickly and regularly as it once did.

“There used to be discipline around failing fast, going back to examples like the Fire Phone,” said a former Amazon executive of more than 15 years who left the company in 2022. “Have we done the same with other devices? No. Have we built devices or experiences where we built it because it was cool tech but it didn’t really solve customer needs? Absolutely. There was less rigor and discipline around actually solving customer problems.”

Another issue, according to a different manager who left in 2022, is that Amazon had begun attempting to invent new things just for the sake of it.

“We grew and expanded for so long that we were driven by the idea that we must innovate, but we didn’t always ask if customers really want that,” the former manager said. “We convinced ourselves they did, but now Jassy is asking, ‘What is the real motivation, and for whom?’”

It’s a delicate balance for Jassy and the company to maintain: Even with these criticisms, some of those who spoke to Recode worried that Jassy’s focus on cost-cutting may cause Amazon to miss out on the next breakthrough idea that could become a future pillar of the company.

“You go up to leadership with a big, maybe wacky, idea, and there was just a very heavy reticence to even consider it,” the longtime exec of more than 15 years told Recode of the time following Jassy’s appointment to the CEO role in July of 2021.

On the other hand, it’s quite possible that the approach that worked for Amazon for the last 10 years may just not be the approach that will work for the next 10. If Amazon was burning more money in recent years but big ideas were still fewer and further between than a decade ago, perhaps something was bound to give.

That’s how Columbia’s Cohen sees it: “The new CEO is willfully steering the ship toward the future with a more methodical and careful approach,” he told Recode. “There is a transition here that is necessary and appropriate. Amazon can’t be all things to all and can’t chase every rainbow.”

For some, the combination of Jassy’s deep operational experience at the company coupled with greater emotional intelligence — “I think Jassy cares and gives a damn about employees more than Bezos ever did,” one former manager said — is fostering some confidence.

“I’m as bullish on Amazon as I’ve ever been,” an employee of more than 10 years who works in a division not impacted by the layoffs told Recode.

For others, especially those whose departments experienced deep cuts, they worry about what a lack of accountability for the mistakes that preceded the cuts means for how Amazon will be run in the future. Even if Jassy wasn’t CEO when Amazon invested in giant warehouse and staffing expansions that would prove misguided, he’s now the one in charge of the fallout.

“If our leaders will not acknowledge that they made some miscalculations, and moved away from what was core to how we operate, how does anybody have faith that we’re not going to go through this again in the future?” a senior manager of more than 10 years said.

But the reality may be that it’s still too early to tell.

“The next 12 months are really when we get to see how Andy Jassy can perform as CEO,” a longtime former senior manager who left in 2022 said.

Amazon’s antitrust settlement in Europe sure looks like a win for Amazon

2022-12-22T12:54:01-05:00

An Amazon warehouse in Warrington, England. | Nathan Stirk/Getty Images

Amazon avoided a potential massive multibillion-dollar fine this week when it agreed to make a series of changes to its shopping site and business practices in Europe that regulators hope will help level the playing field for the hundreds of thousands of merchants who sell goods through the site, as well as logistics companies that compete with the tech giant.

The deal marks the first time in Amazon’s history it has made a bevy of changes as the result of a government investigation, and it could serve as a blueprint for deals that regulators in the US could push for over concerns of anti-competitive behavior.

But at least one of the big changes that EU antitrust officials are framing as an Amazon concession had already been under consideration inside the company for many years, according to two sources familiar with the initiative. Another change Amazon agreed to make in Europe — to stop using certain data it collects about sellers on its third-party marketplace — is a shift that won’t actually impact the company because this data is not particularly useful, a source told Recode.

So while Amazon’s deal appears to be a win for regulators, it may include changes the company can easily accept because they won’t materially affect its competitive edge.

“It appears Amazon’s strategy all along was to make it seem like it was giving things up that it was perfectly comfortable to give up,” one of the sources said.

Amazon has until the summer to make these and other agreed-upon changes, which will apply to its shopping sites across the EU other than in Italy, where the government has undergone its own investigation into the tech giant.

Amazon and spokespeople for the European Union’s antitrust commission did not respond to a request for comment.

In the first instance, the change in question involves Amazon’s “Buy Box,” the section of the shopping site that shows the price and delivery date for a given product, along with “Add to Cart” and “Buy Now” buttons. When there are multiple parties that sell the same product, Amazon’s algorithm chooses which business “wins” the Buy Box and gets the sale. With the EU deal, Amazon has agreed to start displaying two Buy Boxes on its sites in Europe when there is a second competing offer that is materially different in price and/or delivery speed. The idea is that third-party sellers will now have a better chance to get in front of shoppers when competing against Amazon for the sale of the same product.

Yet inside Amazon, a similar idea had already been discussed since at least 2018, before any major known antitrust investigations into the company, according to multiple sources. Dubbed Project Packard, the initiative aimed to show multiple Buy Box offers to shoppers in an effort to provide more options for customers, including the option to wait longer for an item if it meant getting it for a cheaper price. Later, the idea of multiple Buy Box offers was also seen internally as a potential olive branch to sellers who complained publicly about how difficult it was to win that top placement.

“For Amazon to ‘concede’ and show multiple offers is … something they probably would have done anyway,” according to a former Amazon manager familiar with the initiative.

The EU says it can request changes to the presentation if the second Buy Box offer isn’t attracting “adequate consumer attention.”

The EU agreement also forbids Amazon from using “non-public data relating to, or derived from, the independent sellers’ activities on its marketplace, for its retail business. This applies to both Amazon’s automated tools and employees that could cross-use the data from Amazon Marketplace, for retail decisions.” The use of this data was seen as unfair because it could help Amazon’s retail business, which stocks and sells some of the very same merchandise as its sellers, gain a competitive advantage over those sellers. The data could also be used to help Amazon clone popular products for its private-label brands.

Amazon already had a policy against its employees or systems using non-public data from individual Amazon sellers, but that policy was occasionally broken, according to published reports. The new deal forbids Amazon from using that data, but also pooled or aggregate data from multiple sellers, which Amazon employees and systems previously were able to use. However, according to a source, executives have discussed internally how the aggregated data is not particularly valuable in any event.

“Aggregate data just tells you that the [product] category is hot,” according to the source. “You don’t have to look at non-public data for that.”

“That’s why people were gaming the system to use individual seller data,” they added.

Whether the data is useful or not, Amazon has agreed not to use it for its own retail business, as well as its private label business, which includes brands like Amazon Basics. Earlier this year, Recode reported that some Amazon executives had been on board with the idea of getting out of the private-label business altogether if it meant avoiding harsher remedies in any potential antitrust investigations. Amazon is still in that business, however, and the new deal with the EU does not directly affect that business line.

The agreement also includes several changes related to the role Amazon Prime plays for the company. The first lets sellers qualify for the Prime badge, even if they don’t use Amazon’s warehousing and shipping service, known as Fulfillment by Amazon. Another agreement prohibits Amazon from using information gathered through Prime about the performance or rates of outside logistics providers to benefit Amazon’s logistics and delivery business.

The agreement on the changes lasts between five and seven years. But whether they result in a more competitive experience for the merchants, big and small, who sell on and compete with Amazon, is an open question.

Layoffs, buyouts, and rescinded offers: Amazon’s status as a top tech employer is taking a hit

2022-12-07T20:59:16-05:00

The exterior of the Amazon Spheres in downtown Seattle on November 14, 2022, as Amazon began the largest layoffs in its history. | David Ryder/Getty Images

Amazon has long been one of the top employers in the tech industry. Online shopping was consistently growing, and Amazon’s two main profit engines, cloud services and advertising, were growing even faster. If you took a white-collar job at Amazon, whether you stayed there two years or 10, your career seemed to be set. Until last month.

In late November, Amazon began making what are expected to be the largest corporate staff cuts in its 28-year history, axing as many as 10,000 corporate employees, or about 3 percent of the company’s office staff. Rumors continue to spread internally that the number of job cuts might grow, either through traditional layoffs or by pushing out more employees than usual for unsatisfactory performance, with one publication reporting that 20,000 cuts are the actual target. And Amazon began quietly rescinding job offers to future employees as well. This is upending the lives of would-be staff and threatening the company’s reputation in the job market for technical talent — where it was already facing challenges, according to a leaked internal memo exclusively viewed by Recode.

A company spokesperson confirmed that job offers were pulled, which was first reported by The Information, but declined to disclose specific numbers. Even without knowing exactly how many offers the company has rescinded, current and future Amazon employees alike are shocked — underscoring the rarity of the current cost-cutting climate at the tech giant and raising the question of what these pullbacks signal for the economy as a whole. Inside the company, some employees are questioning whether Amazon will still prioritize pursuing big ideas that don’t generate immediate financial payoff. Crucially, much of Amazon’s success can be attributed to investing in projects that weren’t profitable in the short run but which, with Wall Street’s backing, allowed the company to increase its market share and power in a given sector by focusing instead on growth.

“The question among employees is, ‘Does this mean we should only be on teams that add revenue or that we think are ‘the most safe’?” an Amazon senior manager of more than 10 years told Recode. “That’s very damaging to the ‘Think Big’ and ‘Invent and Simplify’ ethos of this company.” (Those are two of the 16 leadership principles that are supposed to guide how work gets done inside Amazon.)

Yet the problem with looking for deeper meaning in Amazon’s recent moves — beyond what we already know about its leaders being leery about the future of the economy and that they bet that a pandemic-fueled e-commerce boom would continue longer than it did — was that Amazon has been in a league of its own as a hiring machine. Between 2019 and 2021, Amazon doubled its employee count, adding 800,000 employees in just two years, including warehouse employees. Amazon now also has more than 300,000 tech and corporate employees across the globe.

“No company had hired like Amazon had in the previous decade,” said Amazon’s former head of communications, Craig Berman, who left the company in 2018 after 14 years. “And so I hesitate to even start to guess at what this could mean because there is nothing historical to base the reaction on.”

As a result, the bewilderment felt by employees and would-be future employees in the wake of the layoffs and job rescissions is understandable, Berman said, especially since the company has not had major job cuts in more than 20 years and largely kept its foot on the gas even during the Great Recession of 2007 to 2009.

“They seemed immune,” Berman said.

Amazon’s new reality has been a harsh wake-up call for would-be employees. Several told Recode they were counting on the job to remain in, or reenter, the US on a work visa and were distraught over needing to find new employment in a short period of time. One employee who had their job offer pulled in late November had just received it in September, with a start date planned for January. Another employee who was slated to start working in a high-paying technical role in the retail division in January was offered a job in October only to have it pulled back the next month.

“I think the worst part for Amazon is the damage they’ve done to their reputation,” this person told Recode.

The employee said they mainly chose Amazon over offers from rival companies because the Seattle-based tech giant was offering a significantly higher pay package. If the financials had been more equal, they said, they would have likely chosen a competitor with a better reputation for work-life balance.

While Amazon had long remained a stable corporate hirer that kept adding new, lucrative roles every year — especially as its stock price rose consistently for much of the past decade — it also developed a reputation among some staff as a sometimes brutal and cutthroat workplace, and one where some employees from underrepresented backgrounds felt discriminated against or worse. Earlier this year, Insider reported that high-performing employees were leaving Amazon corporate divisions at double the normal rate. And according to an internal Amazon memo from June that Recode reviewed, perception of the company’s corporate culture already seemed to be having a negative impact on recruiting even before this cycle of layoffs and pulled offers began.

The internal memo cited a LinkedIn survey of more than 7,000 software developers who weren’t working for Amazon at the time. Among a set of 25 top tech competitors, Amazon only ranked 19th for “good work-life balance,” while it came in 10th for “flexible work arrangements” and 11th for “ongoing employee training & development.” These rankings, the memo stated, were hurting recruiting, with 40 percent fewer job seekers applying for software development jobs at Amazon in May than in January.

Those preexisting recruitment issues could now be exacerbated by the tech giant slashing roles and rescinding job offers. Amazon seems aware of this and is attempting damage control: For those who have had an Amazon job offer reversed, the company will pay them a month’s worth of the base pay they were set to make.

“It’s going to have an impact on your employer brand,” Tom Wilson, president of the HR executive search firm Frederickson Partners, said of companies that rescind job offers.

But whether the one-month payment is enough to fortify the company’s reputation as a top employer is an open question.

Despite offering buyouts to at least hundreds of its recruiters, Amazon expects to hire in some growing areas in 2023, such as Amazon Web Services, even as it retrenches in others like Alexa and its core retail business. After all, if it wants to compete for top tech talent as it pursues ambitions in other industries ranging from e-commerce to video streaming to cloud computing to advertising, it needs to improve its reputation. While 10,000 job cuts only represent approximately 3 percent of all its corporate roles, this is a shift that’s foreign to most employees at Amazon and those who once saw the company as their dream employer.

A leaked Amazon memo may help explain why the tech giant is pushing out so many recruiters

2022-11-23T17:31:29-05:00

Jeff Bezos speaks at the 2018 opening of the Amazon Spheres complex in downtown Seattle. | Ted S. Warren/AP

Last week, Amazon extended buyout offers to hundreds of its recruiters as part of what is expected to be a months-long cycle of layoffs that has left corporate employees across the company angered and on edge. Now, Recode has viewed a confidential internal document that raises the question of whether a new artificial intelligence technology that the company began experimenting with last year will one day replace some of these employees.

According to an October 2021 internal paper labeled as “Amazon confidential,” the tech giant has been working for at least the last year to hand over some of its recruiters’ tasks to an AI technology that aims to predict which job applicants across certain corporate and warehouse jobs will be successful in a given role and fast-track them to an interview — without a human recruiter’s involvement. The technology works in part by finding similarities between the resumes of current, well-performing Amazon employees and those of job applicants applying for similar jobs.

The technology, known internally as Automated Applicant Evaluation, or AAE, was built by a group in Amazon’s HR division known as the Artificial Intelligence Recruitment team and was first tested last year. Amazon first built AI hiring technology in the mid-2010s but discontinued use of its system after it demonstrated a bias against women.

In an initial test, Amazon’s HR division believed that new machine learning models successfully guarded against biases based on race and gender, according to the internal document. Artificial intelligence has become more widely used in hiring across industries in recent years, but there remain questions about its role in introducing or amplifying biases that may occur in hiring processes.

An Amazon spokesperson did not provide comment before publication.

Amazon has for years invested heavily in trying to automate different types of work. In 2012, the company acquired a warehouse robotics company called Kiva, whose robots reduced the need for warehouse workers to walk miles on the job but simultaneously increased the pace and repetitiveness of their work.

Amazon has continued to research other ways to automate its warehouses and introduce new robots, in part because the company churns through so many front-line workers that it has at times feared running out of people to hire in some US regions. In its corporate wing, Amazon previously implemented an initiative called “hands off the wheel” that took inventory ordering and other responsibilities out of the hands of retail division employees and handed them over to technology.

Now, with the creation and expanded usage of the AAE technology, the roles of recruiters inside the second-largest private sector employer in the US could be altered permanently, potentially reducing the number of people Amazon needs to employ.

That is, when the company starts hiring again.

Amazon instituted a corporate hiring freeze earlier in the fall and, just last week, the New York Times reported that Amazon would lay off around 10,000 workers, or 3 percent of its corporate staff, in what would be the largest series of corporate job cuts in the company’s nearly three-decade history. Alongside layoffs in the company’s Alexa and Amazon gadgets divisions, the company sent buyout offers to large swaths of the company’s HR division, including all low- and mid-level recruiters in the US and India. If employees voluntarily walk away from their jobs, Amazon is offering three months of pay plus one week of salary for every six months of tenure at the company. These employees have to decide on the offer by November 29.

The division’s leaders said involuntary layoffs could still happen in the new year, depending in part on how many employees agree to leave the company voluntarily. Amazon CEO Andy Jassy also said that layoffs in the company’s core retail division would occur into 2023.

The AAE technology removes one key role that some recruiters serve at Amazon, which is evaluating job applicants and choosing which should move on to job interviews. The program uses the performance reviews of current employees, along with information about their resumes and any online job assessments they completed during their hiring process, to evaluate current job applicants for similar roles.

“[T]he model is achieving precision comparable to that of the manual process and is not evidencing adverse impact,” the 2021 internal paper read.

The technology was first tested on applicants for medical representative roles at Amazon, who work out of the company’s warehouse network. But since then, it has been used to select job applicants for roles ranging from software development engineers to technical program managers, opening up the possibility of future widespread use across the company.

Within the technology industry, there’s a realization that the Big Tech boom may be over. In many cases, pandemic-fueled business successes have reversed or plateaued. Now, tech titans like Amazon are looking to tighten their belts, seemingly in part by delivering on long-term bets that technology, and AI in particular, can do what humans do — and maybe more cheaply.

Amazon employees will be in layoff limbo into 2023

2022-11-17T18:08:01-05:00

Amazon’s head of devices and Alexa, Dave Limp, during better times in 2019. | Andrej Sokolow/picture alliance via Getty Images

The largest layoffs in Amazon’s history began on Tuesday, with job cuts in the company’s money-burning Alexa voice assistant division and voluntary buyout offers sent to many human resources employees. But the lack of communication from top Amazon leaders for two full days following the first news report of impending layoffs incited chaos and anger among rank-and-file employees searching for answers amid a rare retrenchment in the tech giant’s 27-year history. And even when the company’s CEO finally commented on Thursday, he said an unspecified number of additional layoffs would happen early in 2023, leaving many employees wondering if they would have a job in a few months.

The cycle began on Monday morning when the New York Times reported that Amazon would eliminate approximately 10,000 jobs — or around 3 percent of its worldwide corporate staff. Amazon had recently frozen hiring in some divisions and axed some experimental initiatives, and a company executive warned on recent calls with reporters and Wall Street analysts that shoppers are tightening their belts and Amazon would be too.

After the first report of expected layoffs, many employees assumed they would soon hear from someone at the top of the company — either CEO Andy Jassy or one of his deputies. It didn’t happen. In the end, 48 hours would pass between when news of the layoffs first broke in the press and when a top company executive acknowledged the tough reality to the rest of the company. It would take another day and half for acknowledgment from Jassy, who wrote in a blog post on Thursday that the cuts were “the most difficult decision” Amazon has made during his year and a half as CEO. And even then, it was unclear to many employees if they would soon lose their jobs too.

“I don’t even know if I want to work for this company any more,” an Amazon senior manager who has worked at the company for more than 10 years told Recode on Wednesday afternoon, referencing the lack of transparency from company leaders. “This is a horrendous way to treat people.”

The job cuts at Amazon are just the latest among the ruling class of tech companies used to years of dominant growth and convinced by pandemic-fueled business success that an economic pullback wasn’t on the horizon. The messiness of Amazon’s layoff rollout also underscores how rare such a moment is for the king of e-commerce. Amazon laid off several hundred employees in 2018, but its last significant job cuts date all the way back to 2001, when it axed 1,500 people, or 15 percent of its then-staff, in the wake of the dot-com crash and amid a brief US recession.

This time around, by the evening of the day the news first broke, many employees had pushed aside the day’s work in favor of talking with colleagues to gather crumbs of intelligence about the future of their livelihoods. Some managers told employees they thought their division was safe, but others said they knew little. A source familiar with the decisions said the company’s business leaders wanted to communicate the layoffs to those who were losing their job first, before broadcasting a message to the entire company.

On Tuesday morning, that began happening. Some Amazon employees — most notably those working in the flashy but unprofitable Alexa voice assistant division — found a calendar invitation for a 15-minute videoconference awaiting them. They were told the bad news via a script. Soon, laid-off employees began flooding LinkedIn with their personal announcements. One employee in Alexa’s AI division said 60 percent of her team had been let go “attributed to downsizing/prioritizing projects.” While Alexa is one of the flagship brands that Amazon is best known for, the company has been unable to generate significant revenue for the voice assistant service in the eight years since it launched and soared in popularity. The division that houses Alexa and Amazon’s own tech gadgets had lost more than $5 billion annually in recent years, the Wall Street Journal reported in early November.

Meanwhile, other employees compiled lists of those divisions that were experiencing cuts and those that might be safe, based on a combination of the LinkedIn confessionals, self-reported information, and internal rumors.

Then on Tuesday evening, large swaths of the company’s HR division, including recruiters and software engineers alike, received a buyout offer, or voluntary release program. In exchange for voluntarily walking away from their job, Amazon was offering employees three months of pay plus one week of salary for every six months of tenure at the company. Those who received it have two weeks to make a decision. The division’s leaders would not rule out involuntary layoffs in the new year if more cuts were deemed necessary. It’s unclear whether the severance package would be the same or different, and that lack of clarity created more angst for employees and managers alike.

“They resent being given this ‘choice’ without any information about what the future holds,” one manager told Recode.

By Wednesday morning, most Amazon employees still had heard nothing from the top of the company despite the previous days’ cuts in Alexa and in some other areas like the cloud gaming business Amazon Luna. Employees said little work was getting done, and business-oriented emails had slowed to a trickle.

“The truth of the matter is that if the company was more transparent, we wouldn’t have this shitshow,” another Amazon senior manager told Recode. “Now you have most of the population wondering if they are next.”

Finally, around 11 am ET on Wednesday, Amazon executive Dave Limp, who oversees the company’s wide range of consumer electronic gadgets and the division that runs Alexa, posted a message about the cuts that had started the previous day.

“After a deep set of reviews, we recently decided to consolidate some teams and programs,” he wrote. “One of the consequences of these decisions is that some roles will no longer be required. It pains me to have to deliver this news as we know we will lose talented Amazonians from the Devices & Services org as a result.”

Around the same time, Amazon spokesperson Kelly Nantel released a public comment to reporters.

“As part of our annual operating planning review process, we always look at each of our businesses and what we believe we should change,” it read. “As we’ve gone through this, given the current macro-economic environment (as well as several years of rapid hiring), some teams are making adjustments, which in some cases means certain roles are no longer necessary. We don’t take these decisions lightly, and we are working to support any employees who may be affected.”

Unfortunately for Amazon employees, no layoff news in their division so far doesn’t mean it’s not coming. In Jassy’s note, published around 5 pm ET on Thursday, the CEO said that an undetermined number of additional “role reductions” would happen in early 2023. The New York Times previously reported that beyond the company’s Alexa and HR divisions, Amazon’s core retail business would also eventually suffer cuts. Jassy called out HR and the company’s physical store group as divisions that are expected to experience future job cuts.

“[A]s has been the case this week, we will prioritize communicating directly with impacted employees before making broad public or internal announcements,” the CEO said.

Update, November 17, 6 pm ET: This story, originally published on November 16, has been updated with new details about Amazon CEO Andy Jassy’s comments on the layoffs.

Basically everything on Amazon has become an ad

2022-11-10T13:17:26-05:00

Inside an Amazon fulfillment center. | Michael Nagle/Bloomberg

Type any random product into Amazon’s search bar and look closely at the results. If you don’t scroll, every listing in front of you will most likely be an ad, signaled by a small label with the word “Sponsored.”

And it’s just the beginning.

While company founder Jeff Bezos once said that “advertising is the price you pay for having an unremarkable product or service,” Amazon has in recent years become an ad-selling machine, driven by the substantial profit margins and the rising value of digital retail estate on the most popular shopping site in the West. As a result, Amazon’s ad business grew 58 percent in 2021 to more than $31 billion in revenue, making it the third-biggest online ad seller in the US, only trailing Google and Facebook. In the first nine months of 2022, Amazon’s ad revenue surpassed the money the company makes from Prime, Prime Video, and its other audio and e-book subscriptions combined. Along with Amazon Web Services, advertising has emerged as one of the company’s top two profit engines.

Amazon’s ad revenue surpassed the money it makes from Prime, Prime Video, and its other audio and e-book subscriptions combined

Advertising is now a crucial part of Amazon, and the company has ambitious plans for the future — highlighted by a flashy New York City event for advertisers in October, capped off by a private concert by the Killers, that industry executives said was a reflection of the company’s growing ambition in the sector. Amazon has designs to boost its ad business to new heights by selling more video commercials on Amazon properties like the video game livestreaming service Twitch and during live sporting events streamed on Prime Video; and by offering audio ads on Amazon Music. The company has also invested heavily in in-house software tools that allow brands to purchase highly targeted ads around the web.

With this transformation, Amazon has become a power player in yet another industry, adding advertising to a list that already includes e-commerce, logistics, entertainment, cloud computing, and voice assistants. But as in the other sectors it’s upended, Amazon’s rise in advertising will unleash complex ripple effects on millions of people, from small business merchants trying to make a living from selling on Amazon, to people whose experiences buying stuff online will continue to be altered — on Amazon and its competitors, from Walmart to Home Depot, who are following Amazon’s lead and adding more ads. Some of those changes may be good for those impacted; others might not be so lucky.

“Amazon is always inventing to ensure that our advertising products help customers discover selection they love and help sellers cost-effectively succeed in our store,” Amazon spokesperson Patrick Graham said in a statement. “Customers have many choices for where to shop, and businesses have many choices for where to sell, and we are excited by the positive response from both customers and advertisers to the value our optional advertising services provide them.”

A short history of ads on Amazon

“Everything’s an ad,” said Adam Epstein, co-president of Perpetua, an advertising technology firm that purchases more than $1 billion of advertising through Amazon annually.

That’s what the Amazon shopping experience feels like today, even if ad executives like Epstein believe that some Amazon ad types, like sponsored product videos, improve the experience for the rest of us. This evolution has been years in the making. While Amazon hired its first big external advertising executive back in 2008, the company’s advertising business only became substantial over the last decade. A big reason for that was the introduction of “sponsored product” ads, which let advertisers bid on commonly searched keywords to promote their products at the top of search results on Amazon. Today, they are absolutely everywhere on Amazon’s website and app.

Many advertisers love them — and they have good reason to. While Amazon’s search results ads are a similar approach to Google’s — where advertisers bid on certain keyword search terms to show their product listings at the top of search results — there is one crucial difference: Someone searching for a product on Amazon is usually in the market to buy it soon, while someone searching on Google may just be researching it.

Another difference is that after clicking on an ad on Amazon, the customer often makes a purchase within Amazon’s site, giving the company a better, though not perfect, view of which ads may have resulted in a purchase and which didn’t. Google search ads usually drive users to another site, which makes measuring ad results a bit more complicated, and some Google users may go on to make a purchase at a physical store, further clouding measurement of whether the ad worked. This so-called “attribution” on Amazon can give advertisers a better view and more confidence into which of their ads are actually working — i.e. resulting in a sale — and which aren’t. And, as we’ll get to, Apple has recently made it harder for advertisers to target customers as they move between various apps, which has made the Amazon closed ecosystem more attractive.

But the growth of ads on Amazon has sometimes caused internal tensions at the company. In the early days, some Amazon leaders were annoyed that Amazon vendors were being persuaded to spend money on advertising rather than on under-the-radar product placements that were even more profitable for Amazon, and which didn’t require the company to hand over any real data to brands to show what was working and what wasn’t.

Turf wars also developed when Amazon began allowing advertisers to bid on ads in Amazon search when a customer searched for a competitor’s product. This practice, known as “conquesting,” was not new, but battle lines formed when a big advertiser, like Roku, was advertising against searches for Amazon’s own rival products, like the Fire TV Stick. Amazon eventually blocked some of these advertisers from doing what everyone else could do with non-Amazon products.

And, of course, just the presence of an increasing number of ads on Amazon pages ruffled the feathers of some Amazon staff responsible for the overall customer shopping experience. The company’s retail division, which operates separately from the advertising division, “really believed the customer experience would be negatively impacted by ads,” a former Amazon vice president told Recode, while the ad division “figured there was a way it could be done in a smart and beneficial way.” Ads leaders would also stress how important the profits from the business were.

“We need that component of profit to continue to keep prices low,” was the basic argument, a former executive said.

And if you look at the site today, clearly the pro-ads camp has won out.

Pay to play

Amazon already has massive leverage over its marketplace sellers. Ads give it even more power. In Amazon’s most recent financial quarter, a record 58 percent of all products sold came from third-party sellers — those hundreds of thousands online merchants, mostly small and mid-sized businesses, that pay Amazon for the privilege of selling merchandise through what Amazon calls its “marketplace.”

This model has been a boon for Amazon. These sellers help ensure that the selection in Amazon’s “everything store” is unmatched by any other US retailer. Amazon also generates massive revenue from the fees it charges these sellers — to the tune of more than $28 billion, with a B, in just the last three months — for everything from just listing a product on the site, to storing and shipping items from Amazon warehouses, to customer service — and that’s not counting advertising.

Whereas five or six years ago many sellers could build a business on Amazon with a quality, differentiated product and not much more without spending any money on Amazon ads, sellers say that is just not true today.

Successful sellers have to spend anywhere between 10 percent and 20 percent of their sales on Amazon ads

Successful Amazon sellers have to spend anywhere between 10 percent and 20 percent of their sales on Amazon ads, according to six high-volume sellers Recode interviewed. That’s on top of the other listing and warehousing fees they also give Amazon. Some said that the pay-to-play evolution of the site is one of the top two reasons they have had to substantially raise the prices of their merchandise on Amazon over the past year. (The No. 1 reason for many, ahead of advertising costs, is increases in the fees Amazon charges sellers to store and ship their items out of its warehouses.)

One multimillion-dollar Amazon seller in the apparel category said his firm has had to double their advertising spend on Amazon over the past three years, and subsequently raised their product prices by 20 percent earlier this year.

“It’s gotta come from somewhere,” the seller, who asked to remain anonymous to speak candidly about Amazon, said.

Others, like Judah Bergman, the co-founder of a baby product brand called Jool Baby, said price increases were the only way to stay profitable.

“For some products, we realized that we need to pay for ads but we’ll never profit at our current prices,” Bergman told Recode. “We charge more and spend more on advertising, and that has worked better for us.”

For others, even with the rising ad costs, Amazon’s central position in the e-commerce landscape means spending more on Amazon ads is still better than the alternative. Shinghi Detlefsen, a former Amazon corporate employee who now runs a women’s supplement brand that does most of its sales on Amazon, said it is still more profitable to attract new customers by buying advertising on Amazon than it is by buying ads on Google or Facebook and sending those shoppers to the brand’s own site.

Graham, the Amazon spokesperson, said that advertising is a standard cost of doing business for any merchant or retailer, but that many Amazon sellers succeed without purchasing ads.

The death of organic Amazon

Either way, the Amazon shopping experience has posed hurdles for reputable Amazon sellers and customers alike since the company opened its marketplace to sellers across the world in the mid-2010s and began to aggressively promote its own branded products. A once trustworthy review system faltered as fake review schemes proliferated, with Amazon eventually making internal changes to try to drown them out, and, more recently, taking review scheme organizers to court to try to sue them out of existence. Amazon also invented new ways to promote its own branded products over those from third-party sellers, drawing the ire of regulators and lawmakers in the US and in Europe.

The sponsor-ification of the Amazon shopping experience is just the latest twist. If you’re looking closely enough, a quick search on Amazon for, say, “iPhone screen protector” or “youth soccer socks” will only turn up paid product listings carrying a “Sponsored” label at the top of the results before scrolling.

The line has gotten so blurred now that you have no idea whether you are being surfaced something that’s actually a good product or because the seller behind it is subsidizing it

In some cases, Amazon includes a “Sponsored” label above the brand name in a smaller light-gray font. In other cases, a grouping of product listings will appear above search results, with the sponsored label relegated to the far bottom-right corner. The Federal Trade Commission has never issued guidelines specifically for search ads on a retailer’s site, but FTC staff has told general search engines in the past that since web research shows most US internet users view pages from left to right, the commission recommends that “search engines place any text label used to distinguish advertising results immediately in front of an advertising result, or in the upper-left hand corner of an ad block, including any grouping of paid specialized results, in adequately sized and colored font” — and not along the right side.

In recent years, Amazon has found new ways to toe the line on how clearly it labels its ads. In one case, it tucked a smaller, lighter “sponsored label” underneath a bigger, bolder section label of “Highly Rated.” Amazon previously had a section for organic results called “Top Rated” but launched the “Highly Rated” widget as a section for sponsored listings only. Graham, the Amazon spokesperson, said the company has since released a second type of Highly Rated section that includes both organic and sponsored results.

Along the way, Amazon has essentially given up on effectively surfacing the best products to customers in an organic fashion, and has outsourced that key function to advertisers.

“Personally, I think turning everything into ads is not a better customer experience,” a former Amazon executive told Recode. “I think at the end of the day, consumers want to be able to trust the retailer they’re buying from … and the line has gotten so blurred now that you have no idea whether you are being surfaced something that’s actually a good product or because the seller behind it is subsidizing it.”

The Amazon spokesperson said that advertising on Amazon only works well if the company makes ads useful for customers, and that a variety of factors determine when and where ads are placed throughout the shopping experience.

Other observers made the case that shoppers would flee if they were so turned off by Amazon’s approach, and that the approach is still better than the physical retail world, where product brands are paying for shelf placement or a prominent product display at the end of the aisle, with zero disclosure to the shopper. Some sellers also told Recode that ads help draw attention to new products, and that the proliferation of advertising on Amazon may make it less profitable for nefarious merchants to do business on the site. Whereas before, they might simply be able to game Amazon’s review system to boost sales and earn prominent placement in search results, now they have to spend ad money on top of that.

Jason Goldberg, the chief commerce strategy officer at the advertising giant Publicis, said that you see a mix of both on Amazon today: Merchants and brands with great products who spend ad money to boost their sales to new heights, as well as crappy products utilizing advertising spending to boost slow-moving sales or otherwise bring more awareness to merchandise not worthy of top organic placement.

“It’s like you have retail stores with beautiful indoor displays,” paid for by a brand, Goldberg said, “and then there used to be computer stores that sold every square foot of space to the most desperate bidder. I would argue both are happening on Amazon today.”

Either way, even those who don’t love the proliferation of ads on Amazon today, or how the company chooses to disclose them, know that the ads are providing value to Amazon shoppers in at least one key way.

“They allow Amazon to maintain low prices” — at least for items Amazon stocks and sells itself — “and offer free shipping,” the former Amazon vice president said.

What’s next

Because of the role ads play, coupled with the fact that Amazon can offer advertisers data that most other ad platforms can’t, you should expect to see a lot of Amazon-placed ads in the future: both on Amazon properties and off. Amazon also benefits from changes that Apple made to user privacy on iPhones in 2021, which makes it harder for companies like Facebook to target and track ads for advertisers as iPhone users move from app to app. Since Facebook and other advertising firms can no longer follow the browsing and shopping behavior of app users without them opting in, Amazon has become an even more attractive destination for brands looking to get insights into shopping behavior and convince people to purchase their merchandise.

Amazon’s shopping site is already saturated with ads, though, so it’s unlikely that the company will substantially increase ad revenue from packing even more ad placements within its core shopping sites. Rather, more ad revenue could come from rising prices for the cost-per-click (CPC) rate that advertisers pay for sponsored ads. CPC prices typically rise if competition for ads increases among brands and sellers. And that’s exactly what these ad prices on Amazon had done, year over year, for every quarter over two years until the third quarter of 2022, according to Pacvue, an advertising software company focused on e-commerce sites. Epstein believes the CPC pullback is likely “a leading indicator of softening consumer demand,” as inflation and a weakening economy influence the way shoppers are spending money on Amazon and beyond.

So Amazon’s future ambition in advertising is targeting other parts of the web. Among them: the company’s gaming-streaming service, Twitch; live sports events like Prime Video’s Thursday Night Football; and streaming TV service Freevee. Amazon is courting a variety of marketers to those platforms, including those who want to move spending away from traditional linear TV as it gives up viewership to streaming TV services.

“Traditional TV [advertising] dollars are prime for disruption and they want to go get more of those,” said Melissa Burdick, a former Amazon senior product manager who now runs Pacvue.

Behind the scenes, Amazon has also built an advertising technology system, known as a demand-side platform (DSP), that lets brands buy ads in an automated fashion not only on Amazon properties, but all around the web. Amazon creates so-called “audiences” of internet users, based on aggregated customer browsing and purchasing behavior, or video viewing patterns, that advertisers can target with ads across the web via the DSP. Like competitors, the off-Amazon targeting component in iOS apps will similarly be hurt by Apple’s privacy changes, but the advertising agency Wunderman Thompson estimated last year that just 8 percent of the ad inventory available through Amazon’s DSP would be affected.

The company has also been investing heavily in a so-called “data clean room,” called the Amazon Marketing Cloud, that advertisers use to anonymously compare their customer base with Amazon’s to plan their Amazon ad campaigns, and to analyze how they are impacting sales.

“AMC is the best thing they’ve done since sponsored products,” said Patrick Miller, co-president of digital commerce at Ascential, which owns a portfolio of e-commerce consulting and technology companies.

Taken together, Amazon is positioning itself to become an even bigger player in the overall ad industry in the years to come. The profits the ad division generates are crucial to Amazon’s core shopping business, and the data and technology the tech giant provides to marketers are setting the company apart from most other ad firms. Both sides of this equation will argue that the end result for everyday people will be more relevant ads. But whether it actually turns out that way, or whether this advertising growth is an overall net good or bad thing for Amazon customers, merchants, and other partners, is an altogether different question. And one that doesn’t have a clear-cut answer for now.

Adidas, Kanye, and the $4 billion sneakerhead industry

2022-10-28T18:59:05-04:00

Adidas ended its seven-year business partnership with Ye, formerly known as Kanye West, earlier this week after the artist made a series of antisemitic remarks and wore a “white lives matter” shirt at Paris Fashion Week. Now, the ripple effects of Adidas halting production of the popular Yeezy brand of footwear and apparel has cascaded outside of the company, and into a burgeoning, lucrative, and broader sector: the sneaker resale market.

This slice of the shopping world is where sneakerheads, collectors, and professional resellers alike buy and sell rare or in-demand footwear through online marketplaces like StockX, GOAT, and eBay. In recent years, it’s grown into a $4 billion-plus industry in North America alone, with the potential to reach $30 billion globally by 2030, according to research firm Cowen. But the problem for the big resale players in the industry is that the market is dominated by just three brands. And one of them is Yeezy.

Nike, Jordan Brand, and Yeezy currently account for more than 90 percent of sales in the resale market, according to Cowen. And with Adidas announcing this week that it was dissolving the partnership with Ye and would no longer produce or sell Yeezy-branded goods, these online businesses that aim to fulfill every hypebeast’s desires may suddenly have to look elsewhere to diversify their businesses to keep loyal customers coming back to shop them frequently. The hype associated with new Yeezy releases isn’t what it once was, but the lack of future supply will still likely leave a huge gap.

“It’s possible there’s some short-term pop, but I think the Yeezy era could be over,” said Dylan Dittrich, the head of research at Altan Insights, which publishes information on collectible categories like sneakers, watches, and sports cards.

When Adidas announced on October 25 that it would “stop the adidas Yeezy business with immediate effect,” finally putting the kibosh on a partnership that critics said should have happened much sooner, the resale platforms that benefit from Yeezy sneaker and clothing sales had a decision to make. But their answer soon became clear. With the exception of one smaller player in the Yeezy resale space, The RealReal, the other online marketplaces would continue to let sellers list Yeezy products and buyers purchase them. Yet none of them wanted to talk about that decision. StockX, GOAT, and eBay all failed to respond to requests for interviews or comment.

The most-popular product lists on these sites perhaps explain why. On Thursday, eight of the top 12 bestsellers on StockX were Yeezys, with the site selling thousands of Yeezy Slide sandals over the last three days alone. Dittrich, the Altan Insights research head, said prices of Yeezy Boost 350 V2s, perhaps the most recognizable sneaker model in the Yeezy portfolio, rose between 10 and 30 percent on StockX after Adidas’s announcement.

It looked like fans, collectors, and resellers were making a calculated bet that the lack of future Yeezy supply would increase the value of the artist’s existing footwear — no matter the controversy. Those prices have started to come down in the days since, but not below their pre-breakup position, Dittrich said.

Kola Tytler, who once helped run the Yeezy-centric Yeezy Mafia news site and is the founder of a Milan-based sneaker and streetwear resale store called Dropout, told Recode that resale shop owners across Europe have been stocking up this week on popular Yeezy styles “as it is difficult to see prices and demand dropping significantly despite the controversy.” Visitors to Dropout’s e-commerce site, dropoutmilano.com, have also been searching for Yeezys this week at higher rates than in the past.

All of that sounds like a good thing for the shopping sites fulfilling sneakerheads’ demand. Heightened interest and higher prices typically result in a larger cut of sales for these companies. But what happens if or when fewer customers want to don fashion associated with Ye? Or simply when the impact of Adidas not making any new Yeezy merch is felt and the supply runs low?

In its breakup announcement, Adidas said that it is “the sole owner of all design rights to existing products as well as previous and new colorways under the partnership.” Stock analysts said the company is planning to produce Yeezy designs under the Adidas brand name. It seems unlikely that those products can carry resale value and hype commensurate to Yeezy without Ye’s name or involvement being attached to the product.

“I struggle to see adidas coming close to replicating YEEZY’s success without Kanye,” Tytler wrote to Recode.

Ye has said he will sell new sneaker designs but will need a new partner, which may be a tough assignment; he was escorted out of Skechers headquarters on Wednesday after showing up “without invitation.”

Then again, StockX and GOAT, both founded in 2015, have been making efforts to diversify away from sneakers in recent years, even before the Yeezy fiasco. StockX now has categories for trading cards, collectibles, and accessories, in addition to sneakers, shoes, and apparel. GOAT is earlier in that journey, with its parent company announcing on October 17 that it planned to acquire Grailed, a resale site more known for non-sneaker fashion.

But with both privately held, venture capital-backed companies eyeing eventual IPOs, the race to replace Yeezys may be critical. In the meantime, they’ll take whatever sales and profits that come with the brand that they can still get.

Why Amazon’s stock price is tanking — and why that should worry you

2022-10-27T19:14:44-04:00

The holiday season should be Amazon’s best. This year may be different. | Sean Rayford/Getty Images

Amazon’s stock price fell as much as 20 percent on Thursday afternoon after the tech giant provided a weak forecast for the holiday quarter. The company’s chief financial officer said Amazon is attempting to cut costs as it sees signs that both business and consumer customers are watching their spending.

“We are taking actions to tighten our belt,” Brian Olsavsky, Amazon’s chief financial officer, said in a call with reporters on Thursday.

Amazon said in its earnings release that it expected to generate $140 billion to $148 billion in revenue during the final quarter of 2022, disappointing Wall Street stock analysts who had expected revenue projections of around $155 billion. Sales growth of Amazon’s highly profitable Amazon Web Services cloud computing unit slowed in the third quarter as business customers looked to cut spending — “I think every company is trying to save money,” Olsavsky said — and Amazon’s core retail business softened as consumers began spending less, most notably in Europe.

“Europe has been weaker than North America, although we see the impact of consumers tightening their belts a bit globally,” Olsavsky said. He referenced entering a period of “uncharted waters,” with tightening budgets, inflation still high, and high energy costs.

Words of caution from a top executive at one of the world’s most valuable companies and largest US employers, coupled with the weaker-than-expected holiday forecast, could be a sign that the worst days of the current economic slowdown are still ahead of us. And that should be worrying to anyone, whether they’re a fan of Amazon or a critic who doesn’t want the company to succeed.

And it’s not just Amazon. Other tech companies provided similarly ominous signals recently. Google and Microsoft both told investors this week that they would slow hiring, and Amazon said earlier this month that it would freeze hiring in its core retail business, which is its maturest business unit but also its slowest-growing and least profitable.

Similar to Amazon, Microsoft reported to Wall Street this week that business customers of its Azure cloud computing business were looking to cut spending, signaling broader belt-tightening in the corporate world. And if mid-sized and large companies with large workforces are preparing for the economic climate to worsen, that could be a sign that more people are in jeopardy of losing their jobs and that smaller businesses on less stable footing could have a rocky road ahead.

Silicon Valley is also facing trouble in the advertising business, which is a massive source of revenue at the top technology companies. Amazon, Google, and Facebook — the three largest advertising sales companies in the US — also revealed slowdowns in their ad businesses. Some of that is due to changes in privacy controls Apple started offering iPhone users last year, which can make it harder for marketers using advertising tools from the tech giants to target these users with ads.

But that’s not the whole story. Amazon’s ad business is largely insulated from Apple’s privacy changes, but the company’s CFO said the division is still seeing softening demand from consumer brands and merchants looking to market their goods to Amazon customers, with these advertisers spending less per digital ad impression. Amazon’s ad revenue still grew 30 percent in the third quarter, but that’s down from 52 percent in the same period in 2021.

“We are preparing for what could be a slower growth period, like most companies,” Olsavsky said.

And if tech giants like Amazon, that once seemed invincible amid record sales and profits spurred by the early days of the pandemic, are preparing for the economy to get worse, the rest of us probably should too.

The Amazon Labor Union suffers another loss but vows to keep fighting

2022-10-20T12:42:59-04:00

Amazon warehouse workers protest at an Amazon air hub in California in October 2022. | Irfan Khan/Los Angeles Times via Getty Images

The Amazon Labor Union has lost its second straight election at an Amazon warehouse, 406-206, delivering a blow to the momentum the new union had built with its historic win in April and underscoring the heavy odds stacked against organizing inside one of the world’s most powerful and richest corporations.

The warehouse, known internally as ALB1, is located in Schodack, New York, near the state’s capital of Albany, and opened in 2020. Heather Goodall, the lead worker organizer at the warehouse, previously told Recode that the reason to organize came down to three simple words: quality of life.

“We are missing the mark on quality of life,” she said. Goodall said workers deserved better wages, safer working conditions, and “breaks consistent with the work that we are doing.”

Unlike the other two Amazon facilities where the ALU previously had elections, ALB1 is known as an “XL” warehouse where, as Amazon described it in a job posting, staff “handles the big stuff — those unique customer orders that weigh over 50 pounds: big screen TVs, furniture, appliances, and more.”

Workers at the facility are making $17 an hour, after receiving a $1.30 hourly raise that was announced in the last month. The minimum hourly wage in upstate New York is $13.20.

“We’re glad that our team in Albany was able to have their voices heard,” Amazon spokesperson Kelly Nantel said in a statement, “and that they chose to keep the direct relationship with Amazon as we think that this is the best arrangement for both our employees and customers.”

Prior to the vote tallying, one of ALU’s lawyers, Seth Goldstein, said that the union has already filed dozens of unfair labor practices charges against Amazon with the NLRB, alleging offenses such as retaliation against union supporters, which could have been a sign that the union would contest the outcome in event of a loss.

Goldstein did not immediately respond to a message seeking comment.

But ALU founder Chris Smalls said in a statement that this “won’t be the end of ALU at ALB1.” He alleged that the election “wasn’t free and fair” and that “workers were subjected to intimidation and retaliation on a daily basis.”

“Most of all,” Smalls said, “we are filled with resolve to continue and expand our campaign for fair treatment for all Amazon workers.”

The union has five business days to file objections.

The election near Albany comes six months after the worker-led Amazon Labor Union secured its Staten Island victory, the first US union victory at a facility in Amazon’s history. That battle is not over, though. Amazon contested the union victory, claiming more than 20 issues with the union’s behavior, including harassment of voters and how the NLRB ran and staffed the election. An NLRB official who oversaw the objection hearing has recommended that all of Amazon’s objections be thrown out and that the Amazon Labor Union win be certified. That decision is now before an NLRB regional director, but Amazon CEO Andy Jassy insinuated at the Code Conference last month that Amazon will continue to battle the NLRB on the issue and is not conceding defeat.

“I think that’s going to take a long time to play out, because I think it’s unlikely the NLRB is going to [rule] against themselves,” Jassy said.

This election could be viewed as another test of whether organizers can secure a second victory or whether the original historic win in Staten Island was rooted, at least in part, in the fact that the creators of the Amazon Labor Union had themselves all worked in the facility. One worker at ALB1 told Recode this week that many of his colleagues “don’t want to be represented by someone with no experience in negotiations.”

A second ALU election at another Staten Island warehouse in May ended in a sizable defeat.

“In any of these elections, the odds are really stacked against the workers who are organizing,” Rebecca Givan, a Rutgers labor professor, told Recode earlier this month. “That’s true in any workplace but especially in these Amazon warehouses that have extremely high turnover and where the company has very deep pockets in terms of how much they can spend in their anti-union campaign.”

But workers are continuing to try. Earlier this month, Amazon workers at a warehouse in the crucial Inland Empire logistics region of Southern California filed a petition with the NLRB requesting to hold an election to unionize with ALU. Around 100 Amazon workers at a separate Southern California facility, one of the company’s three US air cargo hubs, reportedly walked off the job this month to demand a $5-an-hour wage increase and to protest what they say is company retaliation against worker organizers.

Amazon has historically fought union organizing vigorously, spending millions to hire outside consultants who hold mandatory anti-union meetings with workers, and strategizing in detail on how to neutralize powerful unions like the Teamsters, according to an internal company memo that Recode previously viewed. With a second straight defeat of a unionization attempt, Amazon’s tactics may be working.

Amazon workers in upstate New York are fighting for a crucial second union win

2022-10-13T13:12:14-04:00

Heather Goodall says the quest to unionize an Amazon warehouse in upstate New York, where a union election began on Wednesday, can be traced back to the suicide of her son, Michael James Fahrenkopf, in 2016. After discovering that a handful of other employees who worked for the same computer chip manufacturer had also committed suicide in recent years, Goodall became concerned that there might be a connection between the deaths and the working conditions inside plants at the $27 billion company. Though she never could prove it, her lingering concerns made her skeptical of the power that large corporations have over their rank-and-file staff and the conditions under which they must work to make ends meet.

She told Recode that when she started working at an Amazon facility in February 2022 and discovered what she saw as poor treatment of the company’s lowest-paid workers, she felt like she needed to stand up and start organizing workers in the hope of influencing positive change.

“Amazon’s obsession was placed on consumers to the point where it became negligent to employees,” she told Recode in late September.

As Amazon has grown over the last decade, so too has scrutiny of how the company treats its hundreds of thousands of workers who have long been the invisible engine of the picking, packing, and shipping machine that powers the company’s e-commerce dominance. While the company led the way for large nonunion retailers in boosting its minimum hourly pay to $15 back in 2018, its warehouses have been home to comparatively high injury rates and worker turnover numbers that led some inside the company to predict that Amazon would run out of workers to hire in the not-so-distant future. In return, worker organizing inside Amazon warehouses has picked up in recent years, with the pandemic as a catalyst. Amazon has responded by deploying staff and hiring anti-union consultants to apply pressure to employees at facilities where union organizing is happening or suspected. A former Amazon executive previously told Recode that unionization was seen internally as “likely the single biggest threat to the business model.”

For Goodall, she says she began talking to fellow workers about the idea of organizing with a union soon after starting her job and eventually sought an election to be represented by the worker-led Amazon Labor Union (ALU), which won a historic vote at a giant Amazon warehouse in Staten Island, New York, in April 2022. Voting for around 400 eligible workers at Goodall’s facility near Albany, New York, began on Wednesday and will run through Monday, October 17. The National Labor Relations Board (NLRB), which oversees the voting, will tally results on Tuesday, October 18. With Amazon management applying heavy pressure inside the warehouse to make sure there’s no repeat of ALU’s first win in Staten Island, the next union victory will be the hardest.

“A victory for these workers would again be an upset,” said Rebecca Givan, a labor professor at Rutgers University. “It’s not just that when you overcome the odds in one workplace that it’s somehow easier.”

For Goodall, the reason to organize comes down to three simple words: quality of life.

“The top thing we are fighting for is quality of life,” Goodall told Recode in early October. “We are missing the mark on quality of life.”

That encompasses many things. Better wages, yes. New workers at the warehouse were paid $15.70 an hour until a $1.30 per hour raise was announced earlier this month. (Minimum wage in upstate New York is $13.20 an hour.) Safer working conditions — that too. (A fire in a cardboard compactor at the facility last week was one of four blazes across three Amazon warehouses within a few days. No employees were injured; night-shift workers were sent home, and employees working the following day shift were kept home with pay.) And better work accommodations for those with disabilities or those coming back to work after medical leave. The facility, known as ALB1, is an “XL” warehouse because, in Amazon’s words, the staff there “handles the big stuff — those unique customer orders that weigh over 50 pounds: big screen TVs, furniture, appliances, and more.”

“We want breaks consistent with the work that we are doing,” Goodall said. “We want to be able to afford to buy lunch and put gas in our cars.”

Amazon spokesperson Paul Flaningan said in a statement, “We’ve always said that we want our employees to have their voices heard, and we hope and expect this process allows for that.”

The election near Albany comes six months after the worker-led Amazon Labor Union secured its Staten Island victory, the first US union victory at a facility in Amazon’s history. But the battle against Amazon there is still ongoing. Amazon contested the union victory, claiming more than 20 issues with the union’s behavior, including harassment of voters and how the NLRB ran and staffed the election. An NLRB official who oversaw the objection hearing has recommended that all of Amazon’s objections be thrown out and that the Amazon Labor Union win be certified. That decision is now before an NLRB regional director, but Amazon CEO Andy Jassy insinuated at Code Conference last month that Amazon will continue to battle the NLRB on the issue and is not conceding defeat.

“I think that’s going to take a long time to play out because I think it’s unlikely the NLRB is going to [rule] against themselves,” Jassy said.

This election will also serve as another test of whether organizers can secure a second victory or whether the original historic win in Staten Island was rooted, at least in part, in the fact that the creators of the Amazon Labor Union had themselves all worked in the facility. A second ALU election at another Staten Island warehouse in May ended in a sizable defeat.

“In any of these elections, the odds are really stacked against the workers who are organizing,” Givan, the Rutgers professor said. “That’s true in any workplace but especially in these Amazon warehouses that have extremely high turnover and where the company has very deep pockets in terms of how much they can spend in their anti-union campaign.”

But workers are continuing to try. Earlier this week, Amazon workers at a warehouse in the crucial Inland Empire logistics region of Southern California filed a petition with the NLRB requesting to hold an election to unionize with ALU. If recent history is an indicator, they won’t be the last.