Amazon is heading into its annual Prime Day sales event on Tuesday much differently than how it entered the pandemic.
The company has long used the two-day event — one of its biggest all year — to lure people to its Prime membership, for which Amazon recently raised the price to $139 a year from $119 a year.
in April as well as its slowest rate of revenue growth in nearly two decades — at 7%. Inflation had added roughly $2 billion in costs.Amazon also acknowledged it had too many workers and expects its excess capacity from its massive warehouse expansion during the pandemic to total $10 billion in extra costs for the first half of this year.
It also increased its warehouse capacity to match the avalanche of orders flooding its site. By the end of 2021, Amazon had leased and owned roughly 387.1 million square feet of space for its warehouses and data centers — more than double what it reported in 2019.Then, the worst of the pandemic eased. Americans felt more comfortable leaving their homes, and demand also slowed across the board. The retail sector's online sales growth in the U.S., which spiked to 36.
To fix its warehousing woes, CEO Andy Jassy said in May the company was going to let some of its leases expire and defer construction on others. Amazon is also subleasing warehouses to cut costs.Preliminary data from the real estate marketplace provider Costar Group suggests the company is disproportionately shutting down its smaller facilities, which tend to have fewer loading docks and parking and are less efficient to operate, said Adrian Ponsen, Costar's U.S.
Amazon signaled its other problem — overstaffing — emerged after onboarding new hires to fill in for workers who were sick when the omicron variant swept the nation last year. But when the sick workers returned, Amazon had too many people, adding roughly $2 billion in costs. That's a far cry from last year, when the company boosted pay to $18 to attract hourly workers in a tight labor market.The issue might be solved naturally by the company’s high attrition rate.
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