Amazon scales back in retail after new loss

Another loss for Amazon in the previous quarter, as net profit plunged below zero for the second time in a row. The e-commerce giant is even scaling back its retail investments as demand continues to slow post-Covid.

Slowest growth in 20 years

Amazon is now paying for its record-breaking growth during the Covid pandemic. CEO Andy Jassy has to guide the company through one of the most difficult periods in its history, as e-commerce sales are slowing down considerably and net profits are below zero for the second quarter in a row.

Last quarter, sales rose 7.2 % to 121.2 billion dollars (120 billion euros), which is the weakest growth in twenty years. The group’s retail division is to blame, as the cloud computing branch recorded a 33 % increase in revenue and marketing income rose by 18 %.

E-commerce sales actually fell by 4 %, although without currency effects the growth would have been flat. Logistics and other services offered by Amazon to sales partners, such as shipping and warehousing, did increase sales by 9 %.

Investing less in retail

Now that the pandemic demand is over, Amazon is forced to scale back. During the pandemic, the company hastily invested in warehouse space and staff, but now the platform player is trying to get rid of that extra capacity just as quickly by subletting or shutting down distribution centres.

Amazon is also postponing expansion plans until next year and will invest less in its retail operations, says CFO Brian Olsavsky. The company has already cut its workforce by 6% and will hire fewer new people this year, the Wall Street Journal reports.

In total, Amazon posted a loss of two billion dollars, compared to a profit of 7.8 billion dollars a year ago. Part of that loss, however, came from electric car brand Rivian, which lost a lot of value this year. Despite persistent inflationary pressure on fuel, energy and transport costs, Amazon is managing to control costs, CEO Jassy stresses.