Published: June 26, 2022

Amazon slows down its focus on growth

Almost one year into his tenure, Amazon CEO Andy Jassy has introduced speed limits on the potentially reckless superhighway Jeff Bezos created.

A new report by the WSJ describes how Jassy is trying to rein in some of the overly ambitious expansion plans by his predecessor, at a time when Amazon is facing its most challenging financial period in years.

  • As a result of higher costs for everything and slowing e-commerce sales, in Q1 the company posted its first quarterly loss since 2015 and its slowest revenue growth in about 20 years. Revenue for its online stores unit even fell by 3% that quarter.
  • Plus, Amazon’s stock has fallen nearly 40% since Jassy started up the job last July, equivalent to a more than $600 billion wipeout in value. A few days after he started, the company’s stock hit a record high.

So what’s Jassy doing?

Like all of us, finding new clothes that fit our post-pandemic body.

  1. First, he’s reconsidering the idea that Amazon needs as many warehouses as 7-Eleven locations. In response to too much capacity, Amazon is reportedly planning to sublet a minimum of 10 million square feet of warehouse space (which sounds like a lot, but it’s still only 5% of the footprint that the company added during Covid).
  2. Jassy was also not impressed by Amazon’s push into brick and mortar. In March, he closed more than 50 of the company’s retail locations, nearly half of which were physical bookstores.
  3. Finally, he’s trying to solve the problem of overstaffing at some warehouses. In less than two and a half years, Amazon hired roughly the same number of employees as the combined workforces of UPS and Costco—and following the Omicron wave, it found itself with too much labor (expensive!).

Big picture: Along with so many others that benefited from the pandemic, Amazon’s leadership team got duped into believing that certain Covid trends—a boom in online shopping, for one—would be written on the economy in Sharpie. Now that we know it’s more like chalk, Jassy and Co. need to figure out how to kickstart growth, responsibly.—NF

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