So far this year, Amazon has announced that it will cut 27,000 jobs nationwide.
Some of this trimming must be viewed as an aftereffect of the pandemic, during which hiring at the online giant doubled. As shoppers return to stores, online ordering has dropped.
It would take a sharp analyst to figure out how much these cuts are due to poor management decisions and how much to general circumstances. No doubt mistakes were made. On the other hand, job hemorrhages have by no means been limited to Amazon: other tech companies have announced layoffs of tens of thousands.
I recently spoke to a Google employee who had been laid off several weeks ago.
“I was devastated,” she said. “I thought high-quality, high-performing employees would be safe.”
These cuts are catastrophic if they apply to you. But viewed from a larger perspective, they simply suggest that tech is entering a new phase of the industry life cycle, which has been widely documented and is well known.
“• Embryonic: an industry just beginning to develop, characterized by slow growth, high prices, low volumes, a substantial need for investment, and a high risk of failure.
“• Growth: characterized by rapidly increasing demand, improving profitability, falling prices, and relatively low competition (though a threat of new competitors is generally at its highest point in this stage).
“• Shakeout: characterized by slowing growth, intense competition, declining profitability, and a focus on cost reduction.
“• Mature: characterized by little or no growth, industry consolidation, and high barriers to entry.
“• Decline: characterized by negative growth, excess capacity, and intense competition.”
Bearing this knowledge in mind, we can see what is going on in the tech industry: it is moving from a classic growth stage to a classic shakeout stage.
What does that mean for online grocery?
Reports on trends in online shopping are often contradictory. Chicory, a New York advertising platform operator, said in December that 56 percent of shoppers who had bought groceries online in the previous 90 days said they were buying more than in the previous year. Shoppers ramp up online grocery purchasing: survey (supermarketnews.com)
Another survey, by Numerator, indicated increased consumer concern about food delivery costs. It said that the leading areas where consumers were cutting costs included restaurants, bars, and food delivery. Will consumers spend less on food delivery? Report says yes. (supermarketnews.com)
Amazon BB #:283186 is unlikely to get out of grocery delivery entirely, and for some consumers, it remains valuable if not essential (busy affluent shoppers, seniors, the disabled—assuming of course that the latter two categories can absorb the costs).
Yet it is difficult to see a future for Amazon in brick-and-mortar grocery. It is closing four of its Amazon Go convenience stores in San Francisco (a venue where the company’s pioneering Just Walk Out technology might have been expected to be especially promising).
Layoffs have hit Amazon Fresh as well, and the company has stalled in opening new stores. The stumbling of Amazon Fresh – Produce Blue Book
If tech is currently moving from a growth to a shakeout phase—characterized, as we have seen, by cost cutting—the first areas likely to see cuts would be those which the company appears to imperfectly understand. And that, for Amazon, is brick-and-mortar grocery.