Why Are Tech Companies like Meta and Amazon Laying off Employees?

Why Are Tech Companies like Meta and Amazon Laying off Employees

As supply falls and inflation takes over, these companies are faced with some decisions. 

It has not been an easy year for those in the tech industry, witnessing massive layoffs and hiring freezes. For those on the sidelines, the tech bust has been eye-opening, and we understand that even though tech may be the future of the world, it might not be so for employment, as has been validated by CEOs

In a letter to his employees, Meta CEO Mark Zuckerberg said, “Today I’m sharing some of the most difficult changes we’ve made in Meta’s history. I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go.” Instead of blaming it solely on the ongoing recession and Covid-19 uncertainty, he took the blame for this phase. 

He pointed to how Covid-19 infused a sense of optimism, as false as it may have been, into the industry. Ecommerce witnessed a massive boom, ushering in millions in revenue. He shared, “Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments.” Sadly, things did not shape out so positively. “Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that,” he added. 

What exactly brought upon such a bleak time? Why are companies, like Meta, Amazon, Google and Apple, letting go of employees? Here’s our lowdown:

1. The decline of ecommerce

As we move on from Covid-induced lockdowns across many economies, the state of ecommerce has returned to either pre-pandemic levels or below them. For the first time, in 2022, the ecommerce footprint is expected to decline by 2.5% globally. 

Reports published in 2020 had painted a different picture. They had noted that Covid-19 accelerated the growth of ecommerce by five years and that it would all be uphill from there. CEOs, like Zuckerberg and online retailer Shopify CEO Tobias Lütke, bought into this great news—until things took an unfortunate turn. New reports adjusted previous forecasts, as the global ecommerce revenue projection declined from US$4.22 trillion to US$3.74 trillion.

The scariest part of the ecommerce state of affairs is that no one knows where it’s headed, not even analysts. This makes things trickier for companies, like Meta, which will have to walk on eggshells and be very careful of their next steps. 

2. Recession fears

The claims of an imminent recession are peppered across our social media feeds and the internet at large. The reign of Liz Truss in the U.K. worsened inflation, causing a global economic downturn. Add to that the Russian invasion of Ukraine, Covid-19 after-effects and changing consumer behavior, and we are headed for even more hiring freezes and greater interest rates in the coming months. Google’s parent company, Alphabet, has already initiated a hiring freeze as it plans on reducing hiring by 50% in the fourth quarter. 

Note that the effects of the recession are not limited to huge companies. Recession trickles down to every single individual in an economy. It reduces our everyday spending ability, causing us to be more mindful. That might result in fewer leisurely purchases, putting companies like Shopify out of business. The consequences are far-reaching and will take a very long time to reverse.

3. The case of disproportionate supply-demand

During Covid, tech companies went on a hiring spree as demand grew. They hired many casual and full-time professionals, paying them six-figure incomes and loading them with benefits. But as people are now returning to their offline worlds, the demand for these companies’ services is falling. However, there is still excess supply thanks to the many new hires, urging companies to cut down. For instance, ecommerce giant Amazon initiated layoffs claiming that “some roles [are] no longer required”. The company has laid off some employees in its retail and human resources departments.

Reduced budgets, growing interest rates and more have driven tech giants to a point where they have to let go of employees. Perhaps it was their foolishness, falling for the pandemic boom and not thinking ahead; perhaps it is a lesson for us all to question every report we read and remember that nothing is for certain, so we shouldn’t overestimate our abilities. 

From the looks of it, things will only get worse from here on. This might be a turning point for big tech players that were raking in the dough all these years. With investors and customers becoming more skeptical, companies will likely be forced to be more cautious with their money and take drastic steps in the coming months. 

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