Why Amazon Stock Withered on Wednesday
Amazon's stock fell nearly 3% on Wednesday following news of the company's decision to close its Amazon Today service, which offered same-day delivery from physical stores. The service will be shut down by December 2, with operations continuing until January 24 for certain retailers. This move is part of Amazon's ongoing cost-cutting efforts, as the service reportedly was not profitable. The closure may impact Amazon's reputation, given its emphasis on quick delivery, especially for Prime members.
News that Amazon (AMZN -2.63%) is apparently retreating from a potentially lucrative business sent the company's share price down on Wednesday. It closed the trading day nearly 3% lower, a notably worse performance than the 1% decline of the bellwether S&P 500 index.
Few tomorrows left for Amazon Today?
Just before market close Tuesday, CNBC published an article stating that Amazon is closing its Amazon Today service. Citing unnamed individuals "with knowledge of the matter," CNBC said the online retailer has completely halted any further development of the program, in advance of winding it down.
Those sources said that Amazon Today, which provides same-day delivery from brick-and-mortar stores and shopping mall locations, will be shuttered by this coming Dec. 2. Customers will be able to obtain goods through the program from certain stores through next Jan. 24, the company told the broadcaster. Those retailers weren't identified.
The network's two sources said that the company broke the news to Amazon Today employees on Monday in a meeting. Those workers were told that some of them would be laid off. Around 300 people are employed in the service, according to the sources, but Amazon claims the total is more like 175.
The cost-cutting continues
If the report is accurate, the closing of Amazon Today will surely ding the reputation of its parent company. After all, one of Amazon's great competitive strengths is its ability to get the wares sold on its site to customers quickly (particularly if those folks pony up for the company's Prime loyalty program).
Then again, there's little reason to keep operating a money-losing unit, if that indeed is the core problem with Amazon Today. Since 2022, management has been on a quest to shave costs, particularly with relatively small operations that aren't profitable.