Is Amazon facing a crossroads with the coronavirus pandemic?

Discussion
Amazon pre-shift temperature check - Photo: Amazon
Apr 06, 2020
Tom Ryan

Amazon.com is reportedly delaying Prime Day 2020, typically held in July, at least until August as it faces extraordinary demand created by COVID-19.

According to meeting notes acquired by media outlets, Amazon also expects a $100 million hit from its excess inventory of devices that now it will now have to sell at a discount.

The supply chain strains were evident on March 16 when Amazon announced it would hire 100,000 workers in the U.S. and temporarily lift pay by $2.00 an hour. On March 17, Amazon said it would no longer accept any non-essential goods at its warehouses amid challenges keeping essentials in stock.

Currently, Prime deliveries for essential in-stock items are showing six-day delivery windows, with some products, such as hand sanitizer, still out of stock. Delivery dates for non-essential items range from three weeks to mid-June. While consumers are believed to be forgiving now, their patience may lessen in coming weeks.

Amazon’s biggest challenge, however, may be appeasing its warehouse and delivery workers. Coronavirus cases have been reported at more than 20 of the company’s U.S. warehouses. Employees told The Wall Street Journal in an article published on March 31 that about half the workers in some distribution centers “in recent days” are out due to health concerns.

An internal memo attained by the WSJ said Amazon had made more than 100 significant changes to human resources and operations over the past few weeks to deal with the business surge and workplace conditions. Beyond higher pay, Amazon has upgraded sick days and paid time off policies. Last Thursday, Amazon announced it would make millions of masks available and check temperatures at all warehouses. The company is analyzing camera feeds with machine learning to ensure workers are keeping adequately apart.

Analysts expect Amazon to gain significant market share with competitors forced to temporarily close doors, although the retailer’s top executives recognize the many execution challenges they face. The Journal wrote, “Senior executives are aware that Amazon’s response will shape public opinion about the company for years to come, according to people familiar with their perspectives. That is true both among consumers and in Washington, where antitrust investigations of the company are continuing.”

DISCUSSION QUESTIONS: Is Amazon facing a make-or-break period based on how it executes amid the pandemic? What will define the company’s success?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"'Operational excellence' now has a huge HR/employee welfare component."
"Perhaps in some way this is stripping away the mythos of Amazon. They will remain the behemoth, but they will have some ground to make up..."
"In my view Amazon is failing, badly. Walmart has a better in-stock position and works better on substitutes."

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25 Comments on "Is Amazon facing a crossroads with the coronavirus pandemic?"


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Mark Ryski
BrainTrust

Amazon will emerge even stronger as a result of the crisis. There’s no questions that as the world’s leading online retailer, Amazon is under tremendous pressure to deliver for consumers through this crisis. And while there is no shortage of challenges and controversies the company is dealing with, the fact is, they seem to be doing a reasonably good job given the difficult, challenging circumstances. Ultimately people will look back on how companies handled the crisis and ask, “did the company have good intentions and did they seem to be doing the right thing?” Overall, Amazon is.

Dick Seesel
BrainTrust

Amazon faces two key issues right now. Inside the company, there are plenty of HR challenges relating to employment conditions, from health concerns to workloads. These aren’t as public-facing as the execution problems, but one set of issues has a huge impact on the other.

As to those execution problems, this is the first time I can recall Amazon’s impregnable reputation for blocking and tackling looking vulnerable. For consumers to continue dealing with weeks-long outages of commodities like sanitizing wipes or toilet paper (not to mention the price gouging) seems like a breakdown of the system. And delivery-based services like Whole Foods and Amazon Fresh are crippled in market after market.

COVID-19 is an unprecedented challenge for the dominant online retailer, with the breakdown of traditional brick-and-mortar retail, but Amazon doesn’t seem any closer to fixing its operational problems than it was a few weeks ago.

Jeff Sward
BrainTrust

Amazon will be forgiven for most of the out-of-stocks and supply shortages. People may be frustrated but they also realize that this was a completely unprecedented and totally unpredictable set of circumstances. The scale of the demand surge Amazon experienced had to be off the charts. Amazon needs to demonstrate that while they are dealing with all the product inventory issues, they are also doing everything possible to protect the health and welfare of their employees and customers. “Operational excellence” now has a huge HR/employee welfare component.

Mohamed Amer
BrainTrust

Your emphasis on Amazon’s need to focus on employee welfare is spot on. Without employees, in stores or in distribution centers and making deliveries, we will lose our sense of hope — of a return to some normality. I think efficiency will take a back seat to continuity and safety.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
5 months 24 days ago

That Amazon has not faltered is a big win in itself. They met expectations. But then none of the biggies — Amazon, Walmart, Google, Apple, or Microsoft — exceeded expectations in terms of standing out with either technology, manufacturing, supply chain or information solutions to help mitigate COVID. This situation will further consolidate Amazon’s hold on the entire retail ecosystem.

Paula Rosenblum
BrainTrust

In my view Amazon is failing, badly. Walmart has a better in-stock position and works better on substitutes.

Gene Detroyer
BrainTrust

As I went to the Walmart site yesterday and shopped and scrolled down on each item I was looking for I could not get anything. Under each picture was “out of stock.”

David Weinand
BrainTrust

Me too — the Walmart site state availability of elastic at the location closest to me (the only location that stated that), but trip to the store yielded nothing but a visual of a large multi-sectioned empty box where elastic used to be. However, I really can’t blame any store or system in such a crazy environment — nothing is perfect.

Zel Bianco
BrainTrust

As some parents would say to their kids,”suck it up” Amazon. This is what happens when you are the biggest and most powerful company in retail. You have to take the good with the bad and yes, the world is watching and will be judging you on how you handle this crisis and beyond. Amazon will need to earn their logistics stripes each and every day and it will be a challenge — but if not Amazon, then who?

Ryan Mathews
BrainTrust
I don’t think this is a make-or-break moment for Amazon, but I do think the company, the rest of the e-commerce world, and the consumer are on the verge of a significant step-change. The real test of Amazon’s brand staying power won’t be that shoppers will have to wait extended periods for non-essential items. It will be whether or not Amazon can get, and stay, in-stock on those essential items a panicked nation suddenly feels a collective urge to horde such as Clorox wipes and, yes, toilet paper. Waiting a few weeks for the latest Stephen King novel will be forgiven. Having your family at prolonged risk will not, especially in areas such as New York and here in Michigan where the infection and death rates continue to climb. Amazon has evolved from a mega-convenience to a (perceived at least) life-or-death necessity for shoppers, and that’s a heavy mantle to carry. As to what will define success, the answer is two simple words – total transparency, and so far they seem to be doing a… Read more »
Gene Detroyer
BrainTrust

This is interesting. “An internal memo attained by the WSJ said Amazon had made more than 100 significant changes to human resources and operations over the past few weeks to deal with the business surge and workplace conditions. Beyond higher pay, Amazon has upgraded sick days and paid time off policies. Last Thursday, Amazon announced it would make millions of masks available and check temperatures at all warehouses. The company is analyzing camera feeds with machine learning to ensure workers are keeping adequately apart.”

The media seems to be broadcasting that Amazon is doing nothing. Based on the media reports, I would give Amazon an “F”. Based on what actually seems to be happening, I would give them an “A”. “A” meaning, I am not sure they or anyone could do better.

Ben Ball
BrainTrust

There is a limit to the peak load preparation any of the major delivery companies like UPS, FedEx or even Amazon can afford to maintain. Having said that, the flex they demonstrate in terms of their own system capacities at times like these is amazing. Like every complex machine, if you run it harder for longer periods of time, you increase the probabilities that something will break. But that’s not the issue for Amazon right now. The problem is the supply chain that supplies Amazon’s warehouses. In the first place, they have to reroute orders from places and equipment that would normally serve physical stores across the country to Amazon warehouses. Second, the supplier companies aren’t nearly as good or as flexible as the big guys are. Walmart has the advantage of already having dedicated supply that it can flex in its system pipeline. They would not meet Amazon’s challenges any better than Amazon is — because the challenges are largely out of their direct control.

Dave Bruno
BrainTrust

Amazon is clearly struggling to execute, which is a first, at least to my recollection. As others have commented, getting – and staying – in stock on essentials will likely have the longest impact on consumer protections. A personal testament to the frustration’s long-lasting potential: I am currently not going to any stores, and all my food and essential supplies are being purchased via delivery. I expected to be able to count on Amazon for my dry goods/pantry items/paper goods needs. Unfortunately for me, they have been completely unreliable. Items I need are perpetually out of stock, and despite their policing efforts, price gouging is rampant. I am frustrated and angry, and I am quickly creating new buying habits from new sources that I expect will not soon change.

Paula Rosenblum
BrainTrust

Clearly you and I agree. It’s a first, and I’m not sure I’ll ever go back, especially given the lack of care for the workforce.

Dave Bruno
BrainTrust

Totally agree re: care for the workforce, Paula. Forgot to mention that in my haste to vent! ;^)

Mark Price
BrainTrust

The pandemic is mostly a “make” time for Amazon, rather than a “break” one. As a single source provider across a wide range of critical products, Amazon is more and more the fallback that consumers trust. The challenge is in supply chain, particularly the “first mile” rather than the last one. Obtaining inventory and then turning it at rates much more rapid than ever forecast will strain Amazon’s logistics to the max. Given the challenges that other retailers are facing, I think Amazon comes out of this super strong.

Doug Garnett
BrainTrust

Any suggestion that Amazon will emerge stronger is jumping too far too fast. Because retailers have had to close their doors, many shoppers are being reminded of why they love brick-and-mortar — and it’s far more than merely “buying goods.”

Amazon also faces backlash from delays. My students who ordered books through Amazon are having to ask for delays in homework due dates because Amazon cannot deliver their books.

Perhaps we will end up seeing that Amazon’s dominance isn’t so “dominant” and relies on appearances created through a carefully crafted house of cards.

It probably won’t be that clear. But while Amazon’s PR department will be telling us how great they are, reality won’t support that claim.

Lisa Goller
BrainTrust

Yes, the world will scrutinize Amazon’s crisis management now. Protecting workers’ well-being and being more generous with them during this pandemic can help Amazon’s reputation as it irons out current logistical challenges.

Yet, big picture, Amazon is poised to win big because it *is* the supply chain. The e-commerce giant is perfectly positioned for this moment.

Clearly it’s a retailer; its private labels make it a supplier, too. Recent investments in private label grocery and pharmacy products help Amazon provide affordable essentials.

Amazon’s split with Fed Ex increased its logistical reach. Selling Amazon Go technology to other retailers will help consumers get in and out of stores fast (while minimizing their need to touch anything).

Also, more people will invest in Prime memberships to access faster service (while cocooning with Kindle, Prime Video and Alexa).

As mid-market retailers, including department stores, fade, I expect Amazon will move into urban real estate to boost its reach, speed and agility. (HQ2 reports offer municipal data on exactly which properties to buy!)

Jasmine Glasheen
BrainTrust

It’s wild to think that, just a few weeks ago, I wrote a piece on whether Amazon was on its way out. We’re seeing the benefits and detriment of mass e-commerce retailers in stark clarity right now. For consumers, Amazon is a lifeline; for workers, it can be fatal. How Amazon handles coronavirus outbreaks in warehouses and among delivery drivers will shape consumer perception of the retailer in the years that come.

Oliver Guy
BrainTrust

It’s a huge opportunity for Amazon but also has some potential pitfalls. The current situation will likely increase the size of the overall online market so if Amazon can grab share then this will be good news for them for the future – but potentially bad news for others…

Lee Peterson
BrainTrust

Looks like Amazon got caught a little flat-footed with the surge. But that’s understandable (to me) considering everyone, literally everyone, is at home and trying to order from them. But the question of whether they’re at a make-or-break point is absurd. NO ONE, repeat no one, is going to come out of this whole mess in better position than them, hands down. The “problems” they’re having now are what we used to call “good problems” and they’re already adjusting and will continue to adjust on the fly while their business grows an easy 25%. That’s a big number on a big number.

Sam Walton used to say, “If you see your competition over there drowning, don’t throw them a life saver, go over there and stick a hose down their throat!” Which I love, but that won’t happen with AMZN. But for every other retailer? This will quite possibly be the hose (look out Target).

Craig Sundstrom
Guest

“Break”? No, Amazon isn’t going anywhere, regardless of what it does during this episode. Actually, of course, they’re in a peculiar position right now: able to operate, but having to be careful that they’re not seen as taking advantage of that position. I think their early restriction on non-essential shipments was a wise move.

Verlin Youd
BrainTrust

First, it seems that Amazon is having weeks of Prime Days at this point. Demand, volume, and sales are certainly up, even if delivery windows are extended beyond normal. Second, customers, as always, will decide the fate of Amazon and are also going to give Amazon a bit of a break as they deal with this crisis and actually seem to be able to deliver better than many retailers. Bottom line, Amazon is going to do just fine and come out of this crisis stronger than ever, using their experience to again raise the bar on delivery performance and customer value.

Chuck Palmer
BrainTrust

Well, it took a global pandemic to slow Amazon’s roll. The reliability we’ve come to expect is in short supply. It wasn’t too long ago the promise of same day delivery was the latest in holy grails. Also, it wasn’t too long ago they were taking extraordinary steps to keep quiet warehouse working conditions and efforts of their staff to unionize.

Perhaps in some way this is stripping away the mythos of Amazon. They will remain the behemoth, but they will have some ground to make up on those extraordinary promises they were making and keeping.

Ricardo Belmar
BrainTrust
Amazon is dealing with two main issues now. First, Their warehousing and distribution model was geared for being an everything store that held a massive variety of products with an ability to ship a few of them to wildly disparate locations around the country. And they did that exceedingly well. The problem is that now EVERYONE is home ordering the SAME products — something Amazon clearly never anticipated, and their warehouses are not stocked with the right inventory to support that model on essential items. That’s why so many people are describing delay after delay in getting their shipments from Amazon. The silver lining for Amazon is that every other e-commerce site is in a similar situation. Even Walmart isn’t immune to this — you’d have better luck in most cases visiting a Walmart store than going online. In my area, grocery delivery — only recently available in most cases — is struggling to keep up. Most services simply won’t give you a delivery or pickup date at all for days on end. Consumers are… Read more »
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Braintrust
"'Operational excellence' now has a huge HR/employee welfare component."
"Perhaps in some way this is stripping away the mythos of Amazon. They will remain the behemoth, but they will have some ground to make up..."
"In my view Amazon is failing, badly. Walmart has a better in-stock position and works better on substitutes."

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