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In 2022, the Nasdaq index, which is dominated by technology stocks, plummeted by 33.1%. A number of technology giants such as Meta, Twitter, and Microsoft announced large-scale layoffs. Silicon Valley, once a holy land for Internet people, has become a bloody sea of layoffs.
As the global economy slows down and the world situation becomes more turbulent, the high-growth bubble of the Internet industry created by the epidemic has begun to burst. Technology giants have awakened from their reckless expansion and have been forced to shrink their businesses and seek strategic transformation. According to Layoffs.fyi, a Silicon Valley layoff tracking platform, the total number of global layoffs by US technology companies from 2022 to 2023 exceeded 500,000. The storm is brewing, and the news of layoffs has also spread to e-commerce giants such as Amazon and eBay.
According to layoffs data tracked by the website Layoffs.fyi, 268 technology companies in Silicon Valley have laid off 74,000 employees as of April 16, 2024. Today, layoffs in technology companies have become normalized and cyclical, and Amazon is no exception.
In 2022, Amazon carried out large-scale layoffs in its warehouses and distribution centers, with the number of direct employees reduced by nearly 100,000, the largest decline in history. In January 2023, Amazon announced a layoff of 18,000 employees, equivalent to 23% of Amazon’s US employees. This will be the largest layoff in Amazon’s history. In March 2023, Amazon once again announced large-scale layoffs, affecting about 9,000 employees. In January 2024, Amazon swung the knife of layoffs at Prime Video and MGM Studios, laying off hundreds of employees. In April 2024, Amazon issued another announcement that the AWS department would cut hundreds of jobs.
In fact, Amazon's frequent layoffs are not only related to external factors such as the downward economic situation, slowing industry growth and increased potential market risks, but are also related to its brutal expansion during the epidemic. Under the impact of the epidemic, offline entities suffered heavy losses, while online platforms such as Amazon and eBay took advantage of the situation and expanded rapidly. At the end of 2019, Amazon had nearly 800,000 full-time and part-time employees, and by the end of 2021, that number had reached 1.6 million, doubling in just two years. However, with the arrival of the post-epidemic era, the global economy is weak and market demand is sluggish. The once glorious online e-commerce platforms now have to face the severe challenge of weak revenue growth. In 2022, Amazon suffered a full-year net loss of $2.7 billion, the worst performance in its history. Under this circumstance, Amazon quickly returned to rationality and began to "slim down" to protect itself, cutting redundant business lines accumulated during the rapid growth period, streamlining staff, making structural adjustments, optimizing resource allocation, and maintaining financial stability. At the same time, Chinese cross-border e-commerce platforms are coming on strong. Chinese cross-border e-commerce giants represented by Tik Tok Shop, Temu, and Shein are rapidly rising in the global market. With their innovative business models, efficient supply chain management, and huge local manufacturing support, they have posed direct competitive pressure to Amazon, forcing Amazon to adjust its strategy and strengthen its core competitiveness. It is reported that since 2023, the number of daily users of Amazon App has decreased by 8 million under the siege of Chinese cross-border e-commerce platforms. At present, TikTok has a market share of over 68% in the US social e-commerce market, Temu has more than 100 million US users, and Shein has become the largest fast fashion consumer brand in the United States with an absolute market share of 40%. Looking around, there are wolves all around. Tik Tok Shop has made a strong breakthrough with its traffic advantage, and Temu has reshaped consumers' minds with its low prices. Amazon's market share is being eroded, and the severity of the competition is beyond words.
Winter is here. Faced with the industry's cold winter and fierce competition, Amazon urgently needs to find new business growth points, and AI seems to be the new gold mine. In January 2024, Amazon sent an email to employees indicating that the company would lay off hundreds of employees at Prime Video and MGM Studios. Recently, Amazon also announced the layoffs of hundreds of jobs in the Alexa voice assistant business unit, citing a change in business focus and the investment of more resources in the field of generative artificial intelligence. Faced with the potential risks brought by market uncertainties, Amazon began to "slim down" by layoffs, digesting the sequelae of its previous wild expansion, focusing on the AI track, and looking for new drivers of business growth. In fact, since 2023, Amazon has been continuously increasing its investment in AI. In March this year, Amazon invested $2.75 billion in Anthropic, an AI startup, in its largest external venture capital investment in 30 years. Amazon's AWS division also announced that it will invest $15 billion in cloud infrastructure in the next three years to accelerate digital transformation and AI applications. Recently, Amazon also announced that it has appointed Andrew Ng, a world-renowned AI scholar, as a member of its board of directors. At present, Amazon's AI layout is mainly reflected in two aspects: e-commerce business and AWS business. In terms of e-commerce business, Amazon improves users' shopping experience and conversion rate by using AI technologies such as recommendation systems, voice assistants, and image search. The latest COSMO algorithm also introduces AI mechanisms. The COSMO algorithm continuously learns and analyzes user behavior through a large language model (LLM) to generate a huge knowledge graph, thereby quickly identifying consumers' potential intentions, guiding buyers to accurately purchase products they really need, and optimizing the shopping experience. In terms of AWS business, Amazon assists sellers in their operations by providing various AI services and tools, including: AI review summary, AI generated listing descriptions, AI image production, etc., providing AI solutions for corporate customers, lowering the threshold for entry into the platform, and helping small and medium-sized enterprises achieve digital and intelligent operations. Currently, Amazon's investment in the field of AI covers multiple levels such as research and development, mergers and acquisitions, and talent training. It intends to seize future development trends in AI technology, improve competitiveness, inject new impetus into its existing business, and open up new sources of revenue. AI has also brought rich rewards to Amazon. By applying AI to its e-commerce and AWS businesses, Amazon has achieved steady growth in revenue and profits, and unlocked unlimited possibilities for future innovation and development. The financial report shows that in 2023, AWS (Amazon Web Services) had revenue of US$91 billion, a year-on-year increase of 13%, making a significant contribution to the overall business growth of its parent company Amazon. Today, AI technology has been deeply integrated into every business aspect of Amazon. From sales operations, algorithm recommendations to warehousing and logistics, AI is everywhere. As early as 2012, Amazon acquired industrial robot maker Kiva Systems for $775 million. In 2019, Amazon acquired autonomous driving company Canvas Technology to give its new warehouse robots more advanced computer vision capabilities. Amazon reportedly has the world's largest fleet of mobile industrial robots, with more than 750,000 robots deployed. According to a forecast by the well-known investment institution ARK Invest, the number of Amazon's working robots will exceed the number of employees in 2030. Through AI and automated robots, Amazon can significantly shorten order processing time, improve warehouse efficiency, reduce transportation costs, and enhance users' logistics experience. In addition, Amazon also uses AI algorithms to combat false reviews, detect fraud, and maintain the ecological health of the platform. At the 2023 annual meeting, Amazon stated that it will continue to invest in artificial intelligence and machine learning technologies in the future to improve customer experience and operational efficiency.
From a global perspective, it is an inevitable trend for e-commerce platforms to embrace AI technology. Many professionals believe that AI will be the next breakthrough point for e-commerce platforms. In March 2023, Shopify announced a partnership with Google Cloud to launch the Discovery AI service, providing merchants with Google's search capabilities and product recommendation services. In May 2023, Lazada launched LazzieChat, a consumer-oriented AI chatbot in Southeast Asia, to optimize the consumer purchasing experience and quickly provide personalized suggestions and product recommendations by analyzing user needs. In July 2023, Wayfair launched a generative AI tool called Decorify . Users only need to upload a photo of their living space, and Decorify can complement the entire home style and recommend corresponding home products to users. In February 2024, ByteDance's video editing tool CapCut (Jianying overseas version) officially opened the public beta of the AI video generation function, helping merchants to generate product video marketing content with one click and reduce video creation costs.
Amazon, Shopify, Lazada, Wayfair, TikTok, Snapchat... For a time, major e-commerce platforms were announcing their own AI strategies and actively making plans in an effort to seize the next era. As the livelihood of millions of people, e-commerce platforms’ exploration of AI will also directly affect merchants. Many cross-border sellers have followed the platform’s pace and actively used AI to empower e-commerce, starting from logistics management, product research, traffic promotion and other aspects, to improve operational efficiency, reduce operating costs and optimize customers’ shopping experience. In a sense, the arrival of the AI e-commerce era has narrowed the gap between large sellers and small and medium-sized sellers. By deeply integrating AI with e-commerce operations, small and medium-sized sellers can reduce costs and increase efficiency, streamline staff, and achieve low costs and easy start-ups. Amazon CEO Bezos has a famous theory - the two-pizza principle, which states that the number of participants must be controlled to the number of people who can eat two pizzas. It is foreseeable that after the arrival of AI e-commerce, many myths about "two pizzas" will emerge! In this silent battle, whoever can make good use of AI will have a greater chance of winning.
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