Despite taking in billions during the pandemic, economic woes and ongoing mass layoffs within the tech industry have forced the world’s two biggest retailers to enact mass layoffs of their own.
Last year’s holiday shopping season was the biggest ever in eCommerce history with sales hitting over $35 billion during the Cyber 5 alone. But easy money wasn’t so easy during Q4 of 2022. In November, Amazon began their first round of cuts and in December, the company announced plans to lay off 20,000 more employees in their warehousing and distribution, tech engineering, and corporate divisions. The news came as somewhat surprising after their frenzied hiring spree during the pandemic.
Alternatively, Walmart had already begun their eliminations as early as August 2022. Citing inflation; economic instability; overpurchasing; COVID-related disruptions in the global supply chain; and decreased consumer spending, Walmart slashed 200 corporate employees off of their payroll, followed by the elimination of nearly 1,500 supply chain jobs in Atlanta, GA in late 2022. The reasoning behind this round of firings was to prepare for increased automation by retooling existing automated warehouses. Coincidentally, Walmart attempted to balance out the layoffs by announcing the availability of over 1,500 openings in their US national distribution and fulfillment centers.
Tech Industry Hit Hardest With Layoffs in 2023
Though the world had unofficially declared the COVID pandemic over in Q4 2022, its lingering effects on the global supply chain and the economy were still very much front-and-center. Consumer spending did finally resume in Q4 2022 to hit record numbers, but mass corporate layoffs across all sectors were making headlines in the US. The one industry which suffered (and continues to suffer) the most was tech.
The tech industry saw its layoffs explode to 649% in 2022. This was the highest rate of tech-related layoffs since the dot-com bubble burst in 2001. 2022 resulted in greater tech industry layoffs than in 2021 and 2021 combined, when COVID was at its absolute worst.
The US unemployment rate in 2022 (3.5%) was reduced to almost half of it was in 2020 (6.7%) and the job market appeared to be flourishing. But in the background, the early rounds of tech industry layoffs were drawing attention to the public. Twitter, Amazon, Meta (Facebook/Instagram), Microsoft, and Alphabet (Google) led the industry purge in 2022 with Amazon having the highest number of layoffs. The percentage of layoffs to current employees, however, was highest at Twitter with over half of their workforce jettisoned in 2022. In comparison, only 1.1% of Amazon’s workforce was eliminated during the 2022 layoff rounds.
The bleeding continued/continues into 2023. As of this writing, there have been 168,243 layoffs in the tech industry. 84,714 employees were fired in January, February saw 36,491 more layoffs, and March resulted in 37,109 new applicants for unemployment benefits. More layoffs came in April 2023 from Amazon, Rapid, Anthemis Group, Lyft, Meta, Redfin, and Apple formally announced their upcoming layoffs. It isn’t just the tech giants that are cutting back their respective payrolls; independents, small-medium businesses, and private tech companies are also feeling the crunch. The pressure has reached the smaller tech companies and they too are beginning to respond by firing employees or, in the most extreme instances, shuttering operations altogether.
Amazon and Walmart Go Into Extreme Cost-Saving Mode
Amazon’s name has been showing up quite often in the lists of tech industry layoffs. This should be notable because the average person forgets that there’s much more to Amazon than just their big-box eCommerce division. Obviously, Walmart’s name isn’t anywhere to be found in the lists of tech sector layoffs because while Walmart has an eCommerce division, they’re still primarily just a big-box retailer. But this bit of information should not go unnoticed. In fact, it’s a dire warning. Amazon and Walmart aren’t just the world’s biggest retailers–they’re also the world’s largest companies by revenue and when the world’s largest companies are very publicly tightening their belts and resort to cost-cutting extremes, that’s enough evidence that something very bad, economically-speaking, is just around the corner.
On March 20th, Amazon CEO Andy Jassy sent a memo to employees that 9,000 more job cuts were scheduled in the coming weeks. The latest round of eliminations are slated to affect corporate and managerial employees at Amazon’s Cloud Computing Services/Amazon Web Services (AWS), marketing, HR, and the video game live streaming service Twitch.
“The overriding tenet of our annual planning this year was to be leaner while doing so in a way that enables us to still invest robustly in the key long-term customer experiences that we believe can meaningfully improve customers’ lives and Amazon as a whole.”
(March 20, 2023)
Jassy will also take a deeper look into Amazon’s overall expenses as the company attempts to reduce as much overhead and operating costs as possible while accepting the all-too-real possibility of another global recession, which would be the second to happen in 16 years.
Walmart announced their latest round of job cuts on March 23rd, 2023. The layoffs are slated to hit at least 5 of their US eCommerce fulfillment centers; affected employees were notified that they had 90 days to obtain new employment at other company locations (the WARN act) as their current positions are being eliminated. About 200 workers at Walmart’s Pedricktown, NJ DC (distribution center) facility received WARN letters while additional DCs in Fort Worth, TX; Chino, CA; Bethlehem, PA; and Davenport, FL are also expected to go through employee purges of their own as these facilities will be scaling back evening and weekend shifts. Walmart states that the number of job cuts at these fulfillment centers will be too low to necessitate issuing out WARN letters. To compensate for the reduction in active DCs, Walmart will be using their own retail store locations to fulfill customer orders.
It is interesting to note that while Amazon and Walmart are both going on firing frenzies as quickly as they went through hiring sprees just 2 years prior, the two corporate behemoths are going about their cost-cutting methods in almost completely opposite directions. The bulk of Amazon’s layoffs have come from the corporate and managerial departments whereas Walmart’s firings have been centralized to warehousing and logistics.
When Giants Fall…
It is undoubtedly concerning that amidst the rampant layoffs in the tech industry and the impending doom of a future economic collapse, the world’s two biggest major corporations have gone into fiscal ‘limp home mode’ as they batten down the hatches and prepare to operate as lean as possible for the time being. For the small-medium online business owner, the news is certainly unsettling but it can also be a call to arms.
In February, Digital Commerce 360 released their 2023 eCommerce Platforms Report and in it, the data stated that 27% of eCommerce companies are planning to switch from their current platform provider to another and the majority of those are expecting to spend between $25,001 to $500,000. Our March 23rd article, eCommerce Platform Migration in 2023, listed the pros and cons of 5 of the industry’s most popular and widely-used eCommerce platforms. With Amazon and Walmart preparing to slow their operations, it’s possible that a repeat of the stock and inventory debacle that cost Amazon a part of their market share to Shopify, Google, and small and medium businesses could happen again–and it could be your business that benefits.
In order for Internet businesses to succeed, it is absolutely paramount that they choose the most appropriate eCommerce platform based on their specific requirements such as day-to-day operations, budget, scale, and potential for future growth.Given the current economic situation and the shape of the technology sector, it’s understandable that businesses will want to curb unnecessary spending and run as lean as they can in the coming months, especially small and medium businesses and those preparing to weather a possible economic depression. At the same time, eCommerce businesses that are dissatisfied with their current service providers understand the need to migrate to platforms that are capable of adequately handling their operating requirements. In spite of any challenges that the economy may bring in 2023 and 2024, eCommerce is still expected to grow. 76% of businesses are still investing heavily in website technology and services. If you haven’t done so already, it might be wise to join that 76% and invest in your own future. Diztinct can help you choose the right eCommerce platform and get you set up with an all-new platform you can trust for your business.