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A Cautious Amazon, Shuts down its Food and EdTech Business in India

Amazon announced on Friday that it would stop operating its food delivery service in India by the year-end.

Photo by Rowan Freeman / Unsplash

Anticipating global recession, Amazon, the business giant based in Seattle, which has been looking at ways to reduce expenses in a variety of its business operations over the past few months, is undertaking an annual review process to determine where it can save even more money in light of the impending threat of a global economic slowdown.

Andy Jassy, the CEO of Amazon, stated that this year's assessment is tougher than usual because of the economy's current state and the company's fast expansion over the past several years.

Following this strategy, Amazon announced Friday that it would stop operating its food delivery service in India by the year-end (1). This move represents the company's exit from a $20 billion industry segment that it entered less than three years ago.

On December 29 in India, the online retailer will stop operating its food delivery service, which is known as Amazon Food. It began selling food in India in May 2020, first in certain areas of Bengaluru.

Later, the company expanded the service to cover the city by forming partnerships with new dining establishments. However, the platform was never aggressively advertised or sold by the company.

Customers have expressed to us for some time that in addition to buying all other necessities on Amazon, they would also like to get ready-made meals from the website. This is especially important in light of recent events because it ensures that people will remain safe in their homes, as the business stated when Food was introduced.

According to research conducted by Sanford C. Bernstein, the market for meal delivery in India is expected to be worth $20 billion in just three years. Zomato, which is publicly listed, has a slight advantage over its competitor Swiggy, which SoftBank, Prosus Ventures, and Invesco back. Zomato has maintained this advantage for the time being.

On Friday, Amazon issued the following statement:

"We don’t take these decisions lightly. We are discontinuing these programs in a phased manner to take care of current customers and partners and we are supporting our affected employees during this transition. Amazon remains focused on providing our growing customer base the best online shopping experience with the largest selection of products at great value and convenience.”

A Part of Restructuring

This statement is a part of a larger restructuring effort that Amazon is doing in India. It announced earlier this week that it would be discontinuing its edtech service Academy in the country over the following calendar year.

Amazon views India as one of its most focus area markets outside the United States, and the company has invested over $6.5 billion in its domestic operations there. According to a recent assessment that Sanford C. Bernstein published, the company is falling behind Walmart's Flipkart and is having trouble making headway in the smaller cities and towns in India.

According to research sent to clients, analysts estimated that Amazon's gross merchandise value in the country for 2021 was between $18 billion and $20 billion, significantly lower than Flipkart's $23 billion.

Amazon has assured its partners with restaurants that it will fulfill all of its contractual responsibilities, including payments and other commitments. Restaurants will still have access to all Amazon services and analyses until January 31, 2023, and the company will support any compliance-related issues until March 31, 2023.

Several other technology companies, many of which had been on a hiring binge over the previous several years, have also been reducing the size of their personnel in response to concerns about a slowdown in the economy.

Last Monday, Facebook's parent company, Meta, said it would be laying off approximately 13,000 employees, representing approximately 13 percent of its total staff. This month, Elon Musk, who recently became CEO of Twitter, is responsible for cutting Twitter's workforce in half.

Shutting Down of Amazon Academy

This follows the company's recent decision to stop supplying its edtech products and services in India beginning in August of 2023 (2). Within a little over one and a half years after it first opened, the Amazon Online Learning Academy will be discontinued. The company has not provided any explanation for the termination of operations.

The Amazon Academy service was a platform that offered to coach for competitive examinations such as the Joint Entrance Examination (JEE), which is required for admittance into the best engineering universities in India.

Amazon Academy will be discontinued "in a progressive manner to take care of current clients," according to a statement released by the firm after it announced the decision to end the program.

The e-commerce giant also stated that it would provide a complete refund of the price to students currently enrolled in the current academic term.

Operations shutting down comes at a time when several different edtech companies are struggling under the weight of schools & coaching centers throughout India reopening after being locked down due to COVID-19.

As part of its quest to become profitable, market leader Byju's announced a month ago that it would be eliminating the jobs of 2,500 staff (3).

According to reports from the local media, several other players, including Unacademy, Toppr, WhiteHat Jr., and Vedantu, had also reported layoffs earlier this year.

Amazons Struggle in India

Amazon has not been successful in becoming profitable in India despite making investments totaling $6.5 billion in the country over the last eight years. The company has negative Ebitda margins ranging from 5-10 percent.

The world's largest online retailer is reevaluating its employees around the globe as a result of the macroeconomic climate's lack of predictability.

Nearly three percent of Amazon's corporate employees and a little less than one percent of the company's workforce worldwide were let go due to these layoffs. The corporation stopped taking applications for new employees back in September. In October, the corporation halted employing new employees for more than 10,000 unfilled positions in its core retail division (4).

Additionally, Amazon put a halt to all corporate hiring. Between April and September, the corporation laid off about 80,000 employees globally, bringing down the total number of employees.