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WSJ: Amazon Mulls Closing Unprofitable Businesses, Stores in Cost-Cutting Measure

Amazon CEO Andy Jassy is reportedly spearheading a cost-cutting review of retail giant to pare down businesses that haven’t been profitable, people familiar with the matter told The Wall Street Journal. Additionally, Amazon has shut many of its physical stores aside from grocery, including bookshops and specialty stores, even though the retailer had a growth plan to nearly double its store footprint, according to people familiar with the plans.

Amazon has told employees in certain unprofitable divisions to seek jobs elsewhere in the company because their teams would be suspended or closed, according to some of the people. The company is aiming to redeploy these employees to more profitable areas.

The cost-cutting measures have had an impact on logistics as well. Amazon has put a greater emphasis on finding ways to save money at warehouses, such as by finding extra room on delivery trucks, according to people familiar with the matter. This is a change from operations during the pandemic, when workers focused on getting packages out as quickly as possible.

The Alexa business, which had an operating loss of more than $5 billion in 2021 according to internal documents, is another of the units under scrutiny. People familiar with the matter said that the voice assistant was one of Jeff Bezos’ pet projects during his final years as CEO, and he continued to fund development even though it was unprofitable.

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However, Jassy has expressed interest in reducing expenses and focusing on profits in recent months, some of the people said. Amazon has lost $3 billion so far in 2022 after posting net income of approximately $33 billion in 2021 and $21 billion in 2020.

The culprit for the decline may be changing shopper habits as the impact of COVID-19 lockdowns fade away. Shoppers’ interest in ecommerce and omnichannel options remain elevated, but Amazon had experienced a massive surge in sales in late 2019 through 2021 that fueled hiring and new investments. A return to normalcy, combined with inflation, has caused shoppers to rein in their spending.

Amazon, which has experienced a 43% stock price decline over the past 12 months, isn’t alone in its struggle with a tough economic environment. Facebook parent Meta is cutting more than 11,000 employees, about 13% of its staff, and Google parent Alphabet has slowed the pace of its hiring as well as pulled back some support for its startup incubator.

However, the ecommerce giant remains optimistic: shares rose more than 13% on Nov. 10 on news of the cuts and data that showed easing inflation.

“Our senior leadership team regularly reviews our investment outlook and financial performance, including as part of our annual operating plan review,” an Amazon spokesman said in a statement seen by The Wall Street Journal. “As part of this year’s review, we’re of course taking into account the current macro environment and considering opportunities to optimize costs.”

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