What does Amazon sacking thousands of employees mean for e-commerce sector in India?

Media and market reports of Amazon planning to lay off thousands of employees in India suggest that the company is finding it challenging to thrive in one of the fastest-growing e-commerce markets in the world. Experts observe that Amazon's move may also have larger repercussions in the Indian e-commerce sector as they feel that there has been a change in consumer behavior post the pandemic. Besides, the hiring of new employees by e-commerce firms has also taken a backseat with the increased usage of automation and digital technologies.

Experts point out that companies such as Amazon have unstaffed retail locations. The trend of utilising Artificial Intelligence (AI) and machines has existed for some time. “These layoffs are significant because AI is displacing even recruiters. While white collars have been using AI to eliminate blue collars, the nerd has begun to target blue collars. The street will be flooded with salespeople, recruiters, personnel officers, and IT specialists, including the creators of the Alexa voice assistant,” remarked Girish Linganna, director of ADD Engineering Components India Limited, an Indo-German Company.

Since January 2022, Amazon's capitalisation has decreased by more than 40 per cent. From Amazon's perspective, 10,000 individuals represent less than one per cent of its global workforce of over 1.5 million. Microsoft experienced a similar situation in the summer of 2022 when it unilaterally and en masse cancelled contracts with recruiters. The company no longer needs their services because it has ceased hiring new staff.

“The firing of 10,000 employees is not a whim of Amazon's management but rather a response to the current state of the globe. The events that transpired after the Russian attack on Ukraine caused a surge in inflation and compelled individuals worldwide to lay low and cease making multiple purchases. The Covid pandemic has generated logistical issues for Amazon's online retail operation. Companies like Jio mart compete with Amazon for market share in India,” said Linganna.

Experts said in the e-commerce segment, many of the business processes have been completely automated. Therefore, some job roles are no longer required. “There was a huge amount of recruitment post Covid due to a sudden surge in demand. But due to the increase in physical and offline shopping, there is no longer any hyper-growth for e-commerce platforms. E-commerce players will have to cut costs due to reduced margins and high inflation for some products. Investments in automation will continue to increase and demand for tech workforce jobs in e-commerce sector will be strong,” explained Sudin Baraokar, Global IT and Innovation Advisor.

According to a few experts, the pandemic-induced consumer behaviour or trends drove up sales figures in some businesses, including technology, e-commerce, Ed tech and entertainment. “Post-pandemic realities have hit enterprises engaged in these or similar businesses and have made cost-cutting an imperative. Employee layoffs are the easiest way to optimise earnings. Revised valuation trends have also contributed in recognizing earnings as a key driver for an enterprise impacting cost reduction,” said Subramanyam S. founder, president, and CEO of AscentHR.

Amazon has focus on multiple business divisions, including e-commerce, and the layoffs are focused on projects and roles that are not profitable and those that the company no longer requires. “E-commerce adoption in India is growing and the government is also taking initiatives to accelerate this growth by creating a platform like ONDC to help retailers reach the e-commerce platforms. If the consumption in India remains positive, then layoffs in Amazon will have a negligible impact on other e-commerce players,” remarked Aditya Narayan Mishra, managing director and CEO of CIEL HR.

During a recent interaction with THE WEEK Ajit Isaac, founder and non-executive chairman of Quess Corp Limited, had said the technology sector is expected to see a slowdown in hiring over the next two quarters and it may take at least six to nine months to see some growth in hiring. However, certain segments in the technology space, especially those related to digitisation and technologies enabling 5G services, will see a growth in hiring. He had said though there could be some effect of the global recession on the Indian economy, it will not be that severe when compared to other economies such as the UK and Japan.

“Indian rupee has fallen much lesser versus the dollar when compared to the other currencies which itself signifies the resilience of the Indian economy. Our energy consumption has increased and there have been healthy GST collections which prove we are a strong economy,” Isaac had told THE WEEK.