Andy Jassy’s First Year at Amazon: Undoing Bezos-Led Overexpansion
Andy Jassy
spent years running one of the fastest-growing divisions in a company famed for its rapid expansion. Nearly a year after taking over as chief executive of
Amazon.com Inc.,
AMZN -3.67%
he’s learning how to tap the brakes.
Amid one of the worst stretches for financial performance in Amazon’s history, Mr. Jassy is working to cut back the excesses of an e-commerce operation the company expanded at breakneck pace during much of the Covid-19 pandemic. At the same time, he’s trying to resuscitate languishing sales in that business and drive growth in other divisions.
Much of his effort is aimed at reversing course on e-commerce initiatives put in place under his mentor, Executive Chairman Jeff Bezos, before he handed over the reins last July.
“Following all that growth that we had in the short term, we have some things [Mr. Jassy] felt we need to do to get right in the business,” said
Patty Stonesifer,
an Amazon board member since 1997. “And so he’s working on the supply, the labor and delivery speeds. He’s right in the middle of it.”
Mr. Bezos and other executives had greenlighted a strategy, guided by a revered internal forecasting tool, that overshot the long-term projections for demand from Amazon. Instead, despite early ideas among industry observers about a permanent shift in consumer behavior, the pandemic-fueled growth in online shopping has slowed as in-person shopping has bounced back.
Early in the pandemic, Amazon saw a pivotal moment to meet demand and expand its e-commerce reach. Under its founder, it opened hundreds of new warehouses, sorting centers and other logistics facilities, and doubled its workforce from 2020 through March, to more than 1.6 million people.
That helped the business for a time—Amazon was one of the biggest beneficiaries of the pandemic tech boom. Its revenue grew by a total of two-thirds across 2020 and 2021, and its profit nearly tripled. But demand hasn’t kept pace with that planned capacity, and its setback has been among the most pronounced.
Amazon expanded operations and staff during the pandemic, but demand hasn’t kept pace. Above, an Amazon warehouse in Country Club Hills, Ill., in November.
Photo:
Sebastian Hidalgo for The Wall Street Journal
The disconnect was a major drag on earnings this year—Amazon signaled the excess space would contribute to $10 billion in extra costs in the first half of 2022. The company’s stock price has fallen by more than a third during Mr. Jassy’s tenure, erasing more than $600 billion in market value.
Now, Mr. Jassy and his team are working to sublease at least 10 million square feet of excess warehouse space, defer construction of new facilities on land Amazon has bought and find ways to end or renegotiate leases with outside warehouse owners. He has closed down much of the company’s bricks-and-mortar retail operation—68 stores—and is looking to pare back its head count.
“For this moment in our corporate history, he’s perfect,” said Amazon board member
Jamie Gorelick
in an interview.
Amazon share price since Andy Jassy became CEO
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon reports higher profits
while contending with steeper
labor and supply costs.
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon sees weaker-than-
expected holiday sales,
combined with a tight
labor market.
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon sees weaker-than-
expected holiday sales,
combined with a tight
labor market.
JULY 8, 2021
Stock hits all-time
closing high.
APRIL 28, 2022
Amazon reports
slowest quarterly
growth in two decades.
JULY 29, 2021
Amazon earnings
show slowdown in
e-commerce sales.
FEB. 3, 2022
Amazon reports
higher profits while
contending with
steeper labor and
supply costs.
JULY 8, 2021
Stock hits all-time
closing high.
APRIL 28, 2022
Amazon reports
slowest quarterly
growth in two decades.
JULY 29, 2021
Amazon earnings
show slowdown in
e-commerce sales.
FEB. 3, 2022
Amazon reports
higher profits while
contending with
steeper labor and
supply costs.
Mr. Jassy’s new focus is proving in some ways harder than rapid growth. He already has lost one key lieutenant,
Dave Clark,
a 23-year veteran who had been appointed to run the consumer business just 18 months earlier.
The two men had worked closely together on efforts to fix the retail business, including an updated plan that Mr. Clark presented to the board last month. Days after the presentation, Mr. Clark resigned, saying on Twitter, “I’ve had an incredible time at Amazon but it’s time for me to build again.” According to people close to Mr. Clark, he was also tired of Mr. Jassy’s day-to-day, hands-on style of managing.
Other retailers also have been caught off guard by the pandemic’s shifting effects on shopping. And Amazon’s stumbles are part of a broader setback for the giant tech companies that have soared in power and wealth for much of the past two decades. Companies like Amazon,
Apple Inc.,
Microsoft Corp.
, and Google gained even more strength during the pandemic, as people shifted more of their life and work online. Now their stocks are falling as people return to prepandemic habits, and several are slowing their hiring and taking other measures to tighten belts.
As Covid-19 spread in early 2020, homebound customers turned to Amazon at an unprecedented clip. Orders neared that of the holiday season—when Amazon typically adds legions of temporary workers to handle demand—and the company was short-staffed and often out of stock on key items, pushing delivery windows from two days to weeks on some items.
Mr. Bezos had largely relinquished day-to-day decision making prior to the pandemic as he took on more outside interests. But with the crisis, he dove back into the business, helping guide Amazon’s strategy and ensuring that Amazon could meet the surge in demand.
Amazon founder Jeff Bezos, second from left, flew into space on the Blue Origin New Shepard rocket from a Texas spaceport in July.
Photo:
Tony Gutierrez/Associated Press
Part of Amazon’s e-commerce challenges today stem from a piece of technology long prized during Mr. Bezos’s tenure as a secret weapon, an internal forecasting system called Supply Chain Optimization Technologies, or SCOT. It was designed to incorporate a multitude of factors and spit out projections for product demand and the growth in logistics needed to fulfill it.
Amazon’s SCOT forecasts produced low, medium and high estimates. Because of unprecedented volume in the early days of the pandemic, Amazon executives including Mr. Clark repeatedly chose the higher end of SCOT’s estimates, said people who used the tool and worked on the SCOT team at the time. Those estimates meant that the company needed many more fulfillment centers and other infrastructure to keep up.
While Mr. Clark’s team didn’t have a blank check, Mr. Bezos and Amazon’s board of directors approved plans to aggressively build out new warehouses and transportation hubs, and go on a hiring spree to get customers their packages.
“A lot of wise people said [that] to meet same-day delivery plus recover from the pandemic, plus address this extraordinary growth and have the customer experience we want, we need more capacity fast, and we held hands and did it,” said Ms. Stonesifer.
In 27 months, Amazon added about as many employees as the entire workforces of
United Parcel Service Inc.
and
Costco Wholesale Corp.
combined.
“We made a decision to build to the high side to avoid constraining consumers and sellers in any way,” said Mr. Jassy at the company’s shareholder meeting in May.
Senior Amazon executives familiar with the forecasting technology said it wasn’t equipped to process an unforeseeable event like the pandemic and caused the company to commit to building out warehouses and infrastructure early in the pandemic that take 18 months to two years to come online. When the virus receded, Amazon was left with more planned capacity than orders.
Publicly, Amazon was still riding a pandemic high on July 5, 2021, when Mr. Jassy took over as CEO. Amazon had smashed its earnings report for the quarter ending March 31, with sales rising 44%. Days after he started the new job, the company’s stock hit an all-time high. In his own fief, the executive had become accustomed to torrid growth. Amazon Web Services, the cloud-computing division that Mr. Jassy had run since its launch in 2006, posted a 32% jump in quarterly sales.
Mr. Jassy had pioneered the cloud business, and it had long been Amazon’s cash cow. It accounted for less than a seventh of total revenue in 2021, but nearly three quarters of operating profit. Amazon’s retail business, and the huge logistics operation it entails, was larger but had a lower profit margin. Amazon also boasts a fast-growing advertising business, among other units.
A 25-year veteran of Amazon, Mr. Jassy had long been a member of Amazon’s “S Team” of top leaders who advised Mr. Bezos. But he knew relatively little about the intricacies of the core, e-commerce side of the business. After taking over last July, he dove into learning the details of the sprawling retail and logistics operations, bringing his trademark obsession with detail.
An Amazon fulfillment center in Garner, N.C., in June 2021.
Photo:
Jeremy M. Lange for The Wall Street Journal
In meetings with Mr. Clark and other senior leaders, he asked tough questions and immersed himself in learning about each part of Amazon’s operations, said people who attended the meetings. They described Mr. Jassy as an “operator” who didn’t manage from a distance, but instead liked to get into the details of specific issues.
A person familiar with Mr. Jassy’s thinking said the executive believes Amazon’s “secret sauce” is that its leadership team “doesn’t fly at 30,000 feet,” but instead rolls up its sleeves and dives into the details.
“Well, at AWS we did things this way,” was a common refrain in such meetings that rubbed some leaders the wrong way, said the people who attended. Some teams found that Mr. Jassy often tried to apply things he learned from his AWS days to very different parts of the business, such as logistics, that weren’t applicable, they said.
Cracks in Amazon’s retail and logistics operation had actually begun to show before Mr. Jassy’s ascendance, and they grew in the ensuing months, but the pattern was unpredictable. As virus cases slowed, shoppers ventured out of their homes, shopping in person. When new variants surged, they went back to relying on e-commerce.
By July 2021, it became clear to Mr. Jassy and Amazon’s logistics team that Amazon’s capacity was outpacing demand. They made a series of intensifying cutbacks to the plans for capacity growth, said people involved in the decisions. They again cut back capacity growth plans in September and December of 2021.
While the new CEO was spending his time on Amazon’s growth areas—such as its digital advertising and Prime Video businesses—his attention focused increasingly on the core retail and logistics operations run by Mr. Clark.
Mr. Clark liked working with relative autonomy under Mr. Bezos and bristled at being managed closely on a day-to-day basis, according to people close to Mr. Clark.
Dave Clark, shown in 2018, ran the consumer business until resigning this month.
Photo:
lindsey wasson/Reuters
Under Mr. Bezos, Mr. Clark’s team would present its plans to leadership just a few times a year, the people said. Once Mr. Jassy took over, he demanded a weekly metrics review of the consumer business, they said.
Before the Christmas holiday, the Omicron variant began circulating, causing an influx of orders. But Amazon’s warehouse workers were also becoming infected. To keep the warehouses humming, Amazon again added more workers, Amazon CFO
Brian Olsavsky
said in April.
Typically after Christmas, Amazon sheds warehouse workers because volume subsides, but Omicron lasted through February and Amazon couldn’t trim its workforce. Once the virus receded in March, order growth slowed, but all of Amazon’s warehouse workers, including the ones who had been out on sick leave, were back, creating a drain on productivity and high costs. In the quarter ending March 31, Amazon had added 14,000 workers. After being understaffed for two years, the company was suddenly overstaffed.
In the past couple of months, around a third of Mr. Jassy’s time was spent on trying to fix the capacity and staffing issues on the retail side of the business, said people familiar with the CEO’s calendar.
In March, Amazon abruptly shut most of its physical retail stores aside from grocery, even though as late as December the unit had a growth plan to nearly double its store footprint, according to people familiar with the plans. In April, the company pulled more than 1,500 jobs it was planning to fill on the corporate side of retail and imposed a fuel and inflation surcharge for some Amazon sellers.
That month, Mr. Clark began working on a three-year plan to get Amazon out of the position it was in, and also return to a prepandemic pledge of one-day shipping. For several weeks, he worked closely with Mr. Jassy, presenting the plan to him and Mr. Olsavsky, the CFO, some of the people said. By this stage, Mr. Clark’s team and Mr. Jassy were communicating nearly daily about turning around the logistics and e-commerce arm, some of the people said.
On April 28, Amazon reported its slowest quarterly growth in two decades and its first quarterly loss since 2015. Divisions including AWS and digital ads had continued growing robustly, but Amazon’s online store sales fell 3%. The company’s stock plummeted on the slow growth and news that Amazon’s warehouse capacity and workforce were bloated.
Some investors and analysts were growing impatient. A few weeks following earnings, stock pundit
Jim Cramer
blasted Mr. Jassy on CNBC. “You have Bezos no longer running Amazon…. But I say, please come back to Amazon. That quarter was so horrible and I have to believe if you were there, you wouldn’t have just over hired,” he said.
“It’s a time to be defensive and focus on cash flow,” said Hal Reynolds, chief investment officer at Los Angeles Capital Management LLC, an Amazon investor, said. “Investors are asking, ‘how does [Jassy] grow the bottom line?’ We need to see better management success and better operating margins.”
Amazon executives said such criticism was misplaced since many of the decisions leading to Amazon’s overcapacity problem were made by Mr. Bezos and other senior leaders.
Amazon delivered packages in Curtis Bay, Md., on March 28, 2020.
Photo:
Alyssa Schukar for The Wall Street Journal
On May 25, Mr. Clark presented his three-year plan to Amazon’s directors at a Seattle meeting, telling the board that his team would get Amazon out of the tough spot it was in, said people in attendance.
Mr. Clark’s plan included reducing Amazon’s massive warehousing network in the immediate term, thinning out its worker base through attrition and getting back to the operational efficiency Amazon had become synonymous with. The company would work to return to its one-day shipping initiative and cut costs, he said.
The board of directors and Mr. Bezos were enthusiastic about the plan.
“We’re very focused on profitability. I’m confident we’ll get back to a healthy level of profitability in our consumer business,” Mr. Jassy said at the shareholder meeting the same day. “We’re working really hard on it.”
Mr. Clark, though, was tired from more than two years of leading Amazon’s most strained business through the pandemic and was also ready for more autonomy. He left the board meeting feeling like he had presented a sound plan for the company that someone else could now execute on, said a person familiar with his thinking.
The following week, a few hours before a scheduled one-on-one meeting with Mr. Jassy, Mr. Clark emailed the CEO his resignation letter, according to senior Amazon executives. Mr. Clark wasn’t pushed out, but at their meeting later that day, Mr. Jassy didn’t try to persuade him to stay, executives said.
The next week, Mr. Clark was named CEO of Flexport Inc. a digital-focused freight forwarder. Amazon hasn’t announced a successor to implement the executive’s three-year plan.
—Sebastian Herrera contributed to this article.
Write to Dana Mattioli at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Andy Jassy
spent years running one of the fastest-growing divisions in a company famed for its rapid expansion. Nearly a year after taking over as chief executive of
Amazon.com Inc.,
AMZN -3.67%
he’s learning how to tap the brakes.
Amid one of the worst stretches for financial performance in Amazon’s history, Mr. Jassy is working to cut back the excesses of an e-commerce operation the company expanded at breakneck pace during much of the Covid-19 pandemic. At the same time, he’s trying to resuscitate languishing sales in that business and drive growth in other divisions.
Much of his effort is aimed at reversing course on e-commerce initiatives put in place under his mentor, Executive Chairman Jeff Bezos, before he handed over the reins last July.
“Following all that growth that we had in the short term, we have some things [Mr. Jassy] felt we need to do to get right in the business,” said
Patty Stonesifer,
an Amazon board member since 1997. “And so he’s working on the supply, the labor and delivery speeds. He’s right in the middle of it.”
Mr. Bezos and other executives had greenlighted a strategy, guided by a revered internal forecasting tool, that overshot the long-term projections for demand from Amazon. Instead, despite early ideas among industry observers about a permanent shift in consumer behavior, the pandemic-fueled growth in online shopping has slowed as in-person shopping has bounced back.
Early in the pandemic, Amazon saw a pivotal moment to meet demand and expand its e-commerce reach. Under its founder, it opened hundreds of new warehouses, sorting centers and other logistics facilities, and doubled its workforce from 2020 through March, to more than 1.6 million people.
That helped the business for a time—Amazon was one of the biggest beneficiaries of the pandemic tech boom. Its revenue grew by a total of two-thirds across 2020 and 2021, and its profit nearly tripled. But demand hasn’t kept pace with that planned capacity, and its setback has been among the most pronounced.
Amazon expanded operations and staff during the pandemic, but demand hasn’t kept pace. Above, an Amazon warehouse in Country Club Hills, Ill., in November.
Photo:
Sebastian Hidalgo for The Wall Street Journal
The disconnect was a major drag on earnings this year—Amazon signaled the excess space would contribute to $10 billion in extra costs in the first half of 2022. The company’s stock price has fallen by more than a third during Mr. Jassy’s tenure, erasing more than $600 billion in market value.
Now, Mr. Jassy and his team are working to sublease at least 10 million square feet of excess warehouse space, defer construction of new facilities on land Amazon has bought and find ways to end or renegotiate leases with outside warehouse owners. He has closed down much of the company’s bricks-and-mortar retail operation—68 stores—and is looking to pare back its head count.
“For this moment in our corporate history, he’s perfect,” said Amazon board member
Jamie Gorelick
in an interview.
Amazon share price since Andy Jassy became CEO
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon reports higher profits
while contending with steeper
labor and supply costs.
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon sees weaker-than-
expected holiday sales,
combined with a tight
labor market.
JULY 8, 2021
Stock hits all-time closing high.
APRIL 28, 2022
Amazon reports slowest
quarterly growth in two decades.
JULY 29, 2021
Amazon earnings show
slowdown in e-commerce sales.
FEB. 3, 2022
Amazon sees weaker-than-
expected holiday sales,
combined with a tight
labor market.
JULY 8, 2021
Stock hits all-time
closing high.
APRIL 28, 2022
Amazon reports
slowest quarterly
growth in two decades.
JULY 29, 2021
Amazon earnings
show slowdown in
e-commerce sales.
FEB. 3, 2022
Amazon reports
higher profits while
contending with
steeper labor and
supply costs.
JULY 8, 2021
Stock hits all-time
closing high.
APRIL 28, 2022
Amazon reports
slowest quarterly
growth in two decades.
JULY 29, 2021
Amazon earnings
show slowdown in
e-commerce sales.
FEB. 3, 2022
Amazon reports
higher profits while
contending with
steeper labor and
supply costs.
Mr. Jassy’s new focus is proving in some ways harder than rapid growth. He already has lost one key lieutenant,
Dave Clark,
a 23-year veteran who had been appointed to run the consumer business just 18 months earlier.
The two men had worked closely together on efforts to fix the retail business, including an updated plan that Mr. Clark presented to the board last month. Days after the presentation, Mr. Clark resigned, saying on Twitter, “I’ve had an incredible time at Amazon but it’s time for me to build again.” According to people close to Mr. Clark, he was also tired of Mr. Jassy’s day-to-day, hands-on style of managing.
Other retailers also have been caught off guard by the pandemic’s shifting effects on shopping. And Amazon’s stumbles are part of a broader setback for the giant tech companies that have soared in power and wealth for much of the past two decades. Companies like Amazon,
Apple Inc.,
Microsoft Corp.
, and Google gained even more strength during the pandemic, as people shifted more of their life and work online. Now their stocks are falling as people return to prepandemic habits, and several are slowing their hiring and taking other measures to tighten belts.
As Covid-19 spread in early 2020, homebound customers turned to Amazon at an unprecedented clip. Orders neared that of the holiday season—when Amazon typically adds legions of temporary workers to handle demand—and the company was short-staffed and often out of stock on key items, pushing delivery windows from two days to weeks on some items.
Mr. Bezos had largely relinquished day-to-day decision making prior to the pandemic as he took on more outside interests. But with the crisis, he dove back into the business, helping guide Amazon’s strategy and ensuring that Amazon could meet the surge in demand.
Amazon founder Jeff Bezos, second from left, flew into space on the Blue Origin New Shepard rocket from a Texas spaceport in July.
Photo:
Tony Gutierrez/Associated Press
Part of Amazon’s e-commerce challenges today stem from a piece of technology long prized during Mr. Bezos’s tenure as a secret weapon, an internal forecasting system called Supply Chain Optimization Technologies, or SCOT. It was designed to incorporate a multitude of factors and spit out projections for product demand and the growth in logistics needed to fulfill it.
Amazon’s SCOT forecasts produced low, medium and high estimates. Because of unprecedented volume in the early days of the pandemic, Amazon executives including Mr. Clark repeatedly chose the higher end of SCOT’s estimates, said people who used the tool and worked on the SCOT team at the time. Those estimates meant that the company needed many more fulfillment centers and other infrastructure to keep up.
While Mr. Clark’s team didn’t have a blank check, Mr. Bezos and Amazon’s board of directors approved plans to aggressively build out new warehouses and transportation hubs, and go on a hiring spree to get customers their packages.
“A lot of wise people said [that] to meet same-day delivery plus recover from the pandemic, plus address this extraordinary growth and have the customer experience we want, we need more capacity fast, and we held hands and did it,” said Ms. Stonesifer.
In 27 months, Amazon added about as many employees as the entire workforces of
United Parcel Service Inc.
and
Costco Wholesale Corp.
combined.
“We made a decision to build to the high side to avoid constraining consumers and sellers in any way,” said Mr. Jassy at the company’s shareholder meeting in May.
Senior Amazon executives familiar with the forecasting technology said it wasn’t equipped to process an unforeseeable event like the pandemic and caused the company to commit to building out warehouses and infrastructure early in the pandemic that take 18 months to two years to come online. When the virus receded, Amazon was left with more planned capacity than orders.
Publicly, Amazon was still riding a pandemic high on July 5, 2021, when Mr. Jassy took over as CEO. Amazon had smashed its earnings report for the quarter ending March 31, with sales rising 44%. Days after he started the new job, the company’s stock hit an all-time high. In his own fief, the executive had become accustomed to torrid growth. Amazon Web Services, the cloud-computing division that Mr. Jassy had run since its launch in 2006, posted a 32% jump in quarterly sales.
Mr. Jassy had pioneered the cloud business, and it had long been Amazon’s cash cow. It accounted for less than a seventh of total revenue in 2021, but nearly three quarters of operating profit. Amazon’s retail business, and the huge logistics operation it entails, was larger but had a lower profit margin. Amazon also boasts a fast-growing advertising business, among other units.
A 25-year veteran of Amazon, Mr. Jassy had long been a member of Amazon’s “S Team” of top leaders who advised Mr. Bezos. But he knew relatively little about the intricacies of the core, e-commerce side of the business. After taking over last July, he dove into learning the details of the sprawling retail and logistics operations, bringing his trademark obsession with detail.
An Amazon fulfillment center in Garner, N.C., in June 2021.
Photo:
Jeremy M. Lange for The Wall Street Journal
In meetings with Mr. Clark and other senior leaders, he asked tough questions and immersed himself in learning about each part of Amazon’s operations, said people who attended the meetings. They described Mr. Jassy as an “operator” who didn’t manage from a distance, but instead liked to get into the details of specific issues.
A person familiar with Mr. Jassy’s thinking said the executive believes Amazon’s “secret sauce” is that its leadership team “doesn’t fly at 30,000 feet,” but instead rolls up its sleeves and dives into the details.
“Well, at AWS we did things this way,” was a common refrain in such meetings that rubbed some leaders the wrong way, said the people who attended. Some teams found that Mr. Jassy often tried to apply things he learned from his AWS days to very different parts of the business, such as logistics, that weren’t applicable, they said.
Cracks in Amazon’s retail and logistics operation had actually begun to show before Mr. Jassy’s ascendance, and they grew in the ensuing months, but the pattern was unpredictable. As virus cases slowed, shoppers ventured out of their homes, shopping in person. When new variants surged, they went back to relying on e-commerce.
By July 2021, it became clear to Mr. Jassy and Amazon’s logistics team that Amazon’s capacity was outpacing demand. They made a series of intensifying cutbacks to the plans for capacity growth, said people involved in the decisions. They again cut back capacity growth plans in September and December of 2021.
While the new CEO was spending his time on Amazon’s growth areas—such as its digital advertising and Prime Video businesses—his attention focused increasingly on the core retail and logistics operations run by Mr. Clark.
Mr. Clark liked working with relative autonomy under Mr. Bezos and bristled at being managed closely on a day-to-day basis, according to people close to Mr. Clark.
Dave Clark, shown in 2018, ran the consumer business until resigning this month.
Photo:
lindsey wasson/Reuters
Under Mr. Bezos, Mr. Clark’s team would present its plans to leadership just a few times a year, the people said. Once Mr. Jassy took over, he demanded a weekly metrics review of the consumer business, they said.
Before the Christmas holiday, the Omicron variant began circulating, causing an influx of orders. But Amazon’s warehouse workers were also becoming infected. To keep the warehouses humming, Amazon again added more workers, Amazon CFO
Brian Olsavsky
said in April.
Typically after Christmas, Amazon sheds warehouse workers because volume subsides, but Omicron lasted through February and Amazon couldn’t trim its workforce. Once the virus receded in March, order growth slowed, but all of Amazon’s warehouse workers, including the ones who had been out on sick leave, were back, creating a drain on productivity and high costs. In the quarter ending March 31, Amazon had added 14,000 workers. After being understaffed for two years, the company was suddenly overstaffed.
In the past couple of months, around a third of Mr. Jassy’s time was spent on trying to fix the capacity and staffing issues on the retail side of the business, said people familiar with the CEO’s calendar.
In March, Amazon abruptly shut most of its physical retail stores aside from grocery, even though as late as December the unit had a growth plan to nearly double its store footprint, according to people familiar with the plans. In April, the company pulled more than 1,500 jobs it was planning to fill on the corporate side of retail and imposed a fuel and inflation surcharge for some Amazon sellers.
That month, Mr. Clark began working on a three-year plan to get Amazon out of the position it was in, and also return to a prepandemic pledge of one-day shipping. For several weeks, he worked closely with Mr. Jassy, presenting the plan to him and Mr. Olsavsky, the CFO, some of the people said. By this stage, Mr. Clark’s team and Mr. Jassy were communicating nearly daily about turning around the logistics and e-commerce arm, some of the people said.
On April 28, Amazon reported its slowest quarterly growth in two decades and its first quarterly loss since 2015. Divisions including AWS and digital ads had continued growing robustly, but Amazon’s online store sales fell 3%. The company’s stock plummeted on the slow growth and news that Amazon’s warehouse capacity and workforce were bloated.
Some investors and analysts were growing impatient. A few weeks following earnings, stock pundit
Jim Cramer
blasted Mr. Jassy on CNBC. “You have Bezos no longer running Amazon…. But I say, please come back to Amazon. That quarter was so horrible and I have to believe if you were there, you wouldn’t have just over hired,” he said.
“It’s a time to be defensive and focus on cash flow,” said Hal Reynolds, chief investment officer at Los Angeles Capital Management LLC, an Amazon investor, said. “Investors are asking, ‘how does [Jassy] grow the bottom line?’ We need to see better management success and better operating margins.”
Amazon executives said such criticism was misplaced since many of the decisions leading to Amazon’s overcapacity problem were made by Mr. Bezos and other senior leaders.
Amazon delivered packages in Curtis Bay, Md., on March 28, 2020.
Photo:
Alyssa Schukar for The Wall Street Journal
On May 25, Mr. Clark presented his three-year plan to Amazon’s directors at a Seattle meeting, telling the board that his team would get Amazon out of the tough spot it was in, said people in attendance.
Mr. Clark’s plan included reducing Amazon’s massive warehousing network in the immediate term, thinning out its worker base through attrition and getting back to the operational efficiency Amazon had become synonymous with. The company would work to return to its one-day shipping initiative and cut costs, he said.
The board of directors and Mr. Bezos were enthusiastic about the plan.
“We’re very focused on profitability. I’m confident we’ll get back to a healthy level of profitability in our consumer business,” Mr. Jassy said at the shareholder meeting the same day. “We’re working really hard on it.”
Mr. Clark, though, was tired from more than two years of leading Amazon’s most strained business through the pandemic and was also ready for more autonomy. He left the board meeting feeling like he had presented a sound plan for the company that someone else could now execute on, said a person familiar with his thinking.
The following week, a few hours before a scheduled one-on-one meeting with Mr. Jassy, Mr. Clark emailed the CEO his resignation letter, according to senior Amazon executives. Mr. Clark wasn’t pushed out, but at their meeting later that day, Mr. Jassy didn’t try to persuade him to stay, executives said.
The next week, Mr. Clark was named CEO of Flexport Inc. a digital-focused freight forwarder. Amazon hasn’t announced a successor to implement the executive’s three-year plan.
—Sebastian Herrera contributed to this article.
Write to Dana Mattioli at [email protected]
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