Is Amazon's CEO on the Right Track To Improve the Company?

Amazon CEO Andy Jassy has announced plans to enhance the company's culture and operational efficiency amid its recent growth. While showing approval for progress in sectors like AWS and Prime Video, Jassy stressed the need for ongoing cultural refinement due to recent expansions and increased managerial layers.

To address these issues, Jassy outlined two main initiatives in an announcement to Amazon employees:

1. Reduce managerial positions: Amazon will cut managerial roles by at least 15% by the end of Q1 2025 to streamline decision-making and reduce bureaucracy, aiming to foster faster decision-making and greater employee ownership.
2. Return to pre-pandemic office attendance: Starting Jan. 2, 2025, Amazon will reinstate pre-pandemic office attendance policies to boost collaboration and reinforce company culture, though flexible arrangements will still be available in certain cases. This means that Monday through Friday, employees will "be in the office outside of extenuating circumstances."

"Having the right culture at Amazon is something I don’t take for granted," Jassy stated in the announcement. "I continue to believe that we are all here because we want to make a difference in customers’ lives, invent on their behalf, and move quickly to solve their problems. I’m optimistic that these changes will better help us accomplish these goals while strengthening our culture and the effectiveness of our teams.

Jassy believes these changes will improve innovation and customer service. However, Amazon faces numerous criticisms and challenges that might not be getting addressed properly.

For example, previous employees and their relatives have shared distressing stories on social media about their negative experiences with Amazon management and Amazon's Performance Program.

Moreover, some social media users are expressing frustration with Amazon's alleged decline in quality. They note that, over time, more products from China have appeared on the platform, often being of poor quality. Users also complain about fake reviews becoming too common, making it hard to trust product ratings. The once-reliable two-day Prime delivery now often takes three or four days, with frequent delays and a rise in counterfeit items misrepresented as name brands. Many are questioning what alternatives exist beyond buying directly from each store.

These customer complaints align with a study from 2018 that showed how at least 61% of electronics on Amazon have fake reviews. If consumers are too trusting of these reviews, it can potentially lead to bad purchases and wasted resources on returns.

Furthermore, despite bans, lead continues to be found in children's toys on Amazon. In July 2023, about 346,000 lead-containing stainless steel cups from Cupkin sold on Amazon were recalled. This issue is ongoing; unsafe products, including those with lead and cadmium, were sold on Amazon as far back as 2017-2018.

Investigations have shown that even after Amazon removes harmful items, they often reappear. The Washington Attorney General now requires sellers to provide safety certificates, but enforcement is weak. Limited oversight of third-party sellers allows counterfeit and unsafe products to persist.

Recently, a Senate probe found that Prime Day significantly increases worker injuries due to understaffing in warehouses. Senator Bernie Sanders reported that Amazon warehouse workers are over twice as likely to be injured during Prime Day compared to industry peers. Despite Amazon's claims of progress and a $750 million investment in safety, the company faces ongoing scrutiny and investigations for potentially underreporting injuries.

As for its financial situation, on Aug. 1, Amazon's stock dropped 6% in after-hours trading following its report of weaker-than-expected second-quarter revenue and a disappointing third-quarter forecast.

The company posted earnings of $1.26 per share, surpassing the expected $1.03, but revenue of $147.98 billion fell short of the $148.56 billion forecast. AWS generated $26.3 billion, exceeding estimates, while advertising revenue reached $12.8 billion, below expectations. At the time, Amazon projected that third-quarter revenue will fall between $154 billion and $158.5 billion, compared to the $158.24 billion average analyst estimate. Online store sales grew 5% year-over-year, and revenue from third-party seller services increased 12%.

Brian Olsavsky, Amazon’s finance chief, attributed the revenue shortfall to consumers buying cheaper products, lowering the average selling price. The company planned to introduce a discount store for unbranded items under $20 to compete with discount platforms.

The question now is whether Jassy's plan will be effective and what strategies he will come up with next to help Amazon maintain its leadership position.