Annual loss of $30 billion, layoffs of 18000 people! The world's largest e-commerce group is in deep trouble

Tech 2023-05-14 22:23:57 Source: Network

As the world's largest e-commerce company, Amazon was once a leading international e-commerce enterprise that domestic e-commerce companies competed against. In fact, in addition to e-commerce services, Amazon also involves production and manufacturing, chips, advertising, cloud computing, and other businesses

As the world's largest e-commerce company, Amazon was once a leading international e-commerce enterprise that domestic e-commerce companies competed against. In fact, in addition to e-commerce services, Amazon also involves production and manufacturing, chips, advertising, cloud computing, and other businesses. With its comprehensive logistics system, Amazon has become the most trusted e-commerce platform in Western countries in Europe and America. A few years ago, Amazon was one of the top 10 companies in the Fortune 500 in terms of both revenue and profits, with an annual revenue of over $500 billion, equivalent to the total amount of goods imported by the United States from China in a year. Its founder, Bezos, once became the world's richest person and became a hot topic of discussion.

However, the past 2022 has been a bumpy year for Amazon, with frequent negative news such as stock price declines, corporate business tightening, layoffs, and headquarters shutdowns. According to publicly available information, Amazon's stock price fell by more than 50% in 2022 alone, which can be described as a halving. We all know that the decline in stock price means that the company's business operations have encountered problems, and indirectly reflects the company's profitability. The annual financial report also confirmed external predictions, with Amazon's operating profit of $12.2 billion in 2022 and $24.9 billion in 2021, a year-on-year decrease of 51%; In terms of external investment, Amazon's annual loss in new energy vehicles alone exceeded $12.7 billion. So the question arises, why did Amazon, a trillion dollar e-commerce giant, experience a decline in profits and fall into a quagmire?

Industry analysts believe that the reasons for Amazon's current predicament can be divided into at least three aspects.

1 The decrease in purchasing power caused by the US dollar interest rate hike

As the world economy slows down, a rate hike in the US dollar has become inevitable. According to official disclosure, it is not difficult to find that the US dollar has continuously raised interest rates, resulting in a decrease in purchasing power in regions closely related to the US dollar, which has led to further shrinkage of the demand side. Amazon's main business is e-commerce, with e-commerce revenue accounting for up to 42%. According to data, in 2022, Amazon's e-commerce operating profit in North America alone lost $2.8 billion, with a cumulative global loss of $7.7 billion.

2 The public's interest in e-commerce is decreasing after the liberalization

Due to well-known reasons, the dependence of the public on e-commerce has increased in the past three years. However, since mid-2021, some Western countries have been "lying flat" one after another, and the people who have opened up naturally need to yearn for freedom, so offline "retaliatory" consumption appears very abrupt. In fact, in Western countries, people are more enthusiastic about offline shopping than in China, where many so-called e-commerce shopping festivals are held spontaneously. The increase in offline consumption naturally reduces online consumption, and Amazon, which relies on e-commerce for profit, will naturally be affected.

3 Blindly investing

In order to benchmark Tesla, Amazon invested in American new energy pickup truck and SUV manufacturer Rivian. However, Rivian, known as Tesla's biggest competitor, suffered a huge loss last year and its stock price fell. Amazon has accumulated an annual loss of up to $12.7 billion in this investment, surpassing the e-commerce operating loss. It is obvious that this loss was caused by a "human error" and was the result of irrational investment by the management.

Nowadays, the losses in 2022 are transmitted to various departments of Amazon like dominoes. According to data, Amazon is expected to lay off 18000 employees in order to streamline its operating costs. This is the largest layoff since Amazon's establishment and the largest layoff in the entire technology industry to date. In addition, Amazon's new headquarters construction has also been repeatedly reported to be suspended due to cash flow issues. With the further deterioration of the world economy, the advertising and cloud computing sectors that could have created huge profits for Amazon will also become bleak prospects, and the strategy of relying on cross subsidies to maintain the normal operation of the group will also be stretched.

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