Amazon reportedly halts recruitment in its retail division, indicating a change in focus.
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In a surprising turn of events, Amazon, the global e-commerce leader, is facing challenges in its retail business. According to analysts, these difficulties could be attributed to over-hiring during the pandemic.
Amazon's retail sales have been on a downward trend all year, with surging expenses pushing the company into the red in the most recent quarter. To stem the losses, the company has frozen corporate hiring in its retail business until early 2023, and has also cancelled or delayed dozens of warehouses.
Paula Rosenblum, co-founder and managing partner at RSR Research, states that Amazon is a retailer but not a particularly good one. The company has never been profitable in retail, and according to Rosenblum, Amazon doesn't know how to do brick-and-mortar retail in a practical way. This is evident in the closure of all its bookstores and 4-star general merchandise stores this year.
However, Amazon's third-party marketplace, which is responsible for nearly two-thirds of the goods sold on its site, has been a saving grace. This marketplace has helped Amazon maintain its position in the retail sector, despite its struggles.
Amazon's new head of retail, whose name is not explicitly named in the search results, is working on new strategies to leverage the company's strengths. One such strategy is the exploration of ads, including livestreaming, and video and music streaming.
The company is also focusing on its subscription sales, which rose 10% in the most recent quarter, and its seller services revenue, which rose 9.1%. Advertising sales, on the other hand, saw a significant increase of 17.5%.
In a departure from its reliance on the annual Prime Day sale to boost its membership base and sales, Amazon is holding a second Prime Day event this month. This move is aimed at further increasing its advertising revenue.
Amazon continues to have open roles available across the company, but the hiring strategies may vary in different businesses. The company is also striking deals with other retailers to leverage its "just walk out" in-store payment tech.
Erik Gordon, professor at the University of Michigan's Ross School of Business, suggests that the surge of demand in e-commerce was unsustainable and led to over-reactions in retail hiring and warehouse building. He notes that shopping locally is often preferable to waiting on Amazon's swiftest delivery time, and many consumers seek unique or genuine items that Amazon may not always provide.
Despite these challenges, Amazon isn't leaving the retail business. According to Rosenblum, Amazon isn't a particularly good retailer, but it isn't leaving the sector either. The company's AWS cloud computing unit has been its profit center for a long time, and it continues to be a significant player in the e-commerce market.
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