Amazon is showing us what a soft landing looks like

THE question of whether the United States economy can achieve a soft landing is one that continues to preoccupy investors. For a look at how it might be possible, consider Amazon.com, which arguably has achieved just that.

Amazon’s e-commerce business unit essentially went through a recession during the first half of 2022 as consumers shifted from buying goods online to spending on activities such as travelling and dining out. But the retailer has managed to respond to the rapid change in consumer behaviour by adjusting staffing levels at its warehouses and relying on other, less volatile parts of its business empire. While there is no guarantee that the broader US economy can pare back activity without triggering a more painful slump, Amazon’s rebalancing holds useful lessons.

In earnings released last Thursday, Amazon reported slowing sales growth and its second consecutive quarterly loss, which included a write-down of the company’s stake in electric vehicle maker Rivian. Most of the weakness in the company’s core operations occurred on the e-commerce side, which earlier this year wound up with more staffing and warehouse capacity than it needed. The company had made investment decisions in 2020 based on the initial surge in demand following the onset of the Covid-19 pandemic. By the time that capacity came online in early 2022, consumers had begun pulling back on purchases of certain goods.