Amazon Buckles Under Stress of Staple-Hoarding | E-Commerce
By Jack M. Germain
Mar 17, 2020 9:57 AM PT
Shopping hysteria in the wake of the COVID-19 pandemic is crippling Amazon’s ability to fill online orders and meet timely delivery promises.
The company said Tuesday that it would increase pay in the U.S., UK and Europe for employees engaged in fulfillment operations, as well as open 100,000 new full and part-time positions to meet the surge in demand.
Amazon has been was running out of household staples and popular brand items as more people have been shopping online in the midst of the coronavirus outbreak.
Many household items are out of stock and replacement shipments are not yet available, according to the company. The company also warned shipping times would be slower for products still available.
Amazon Prime members typically get orders delivered within one or two days. That delivery window now is scheduled for at least twice as long. The company has more than 150 million paid Prime members around the world.
Amazon faces a range of practical internal and external challenges that impact its performance in dealing with the demands of the coronavirus pandemic, according to Charles King, principal analyst at Pund-IT. For one thing, the company has to consider the health of both its own and its partners’ employees.
Amazon’s remarkable fulfillment and delivery machine is enabled by the company’s massive 750 thousand workforce, he pointed out. As employees and their families are impacted by COVID-19, it is likely to have a tangible influence on Amazon’s ability to deliver the goods, literally, the way customers have come to expect.
“The bottom line is that despite its seeming invincibility, Amazon is subject to the same external forces that impact any other business,” King told the E-Commerce Times.
As COVID-19 has spread, more people have turned to shopping online. In the short term, this is having an impact on how Amazon serves its customers. Staff are working around the clock with selling partners to increase availability of products and delivery capacity, Amazon said.
The company also is working to ensure that no one artificially raises prices on basic need products during the pandemic. The company has blocked or removed tens of thousands of items that violated its longstanding pricing policy.
In addition, the company is establishing the Amazon Relief Fund with a US$25 million initial contribution focused on supporting its independent delivery service partners and drivers. That support includes Amazon Flex participants and seasonal employees under financial distress during this challenging time.
Amazon will offer all the members of these groups the ability to apply for grants approximately equal to up to two weeks of pay if diagnosed with COVID-19 or placed into quarantine. Going forward, this fund will support Amazon employees and contractors around the world who face financial hardships from other qualifying events.
These include natural disasters, a federally declared emergency or an unforeseen personal hardship. Applicants may apply and receive a personal grant from the fund ranging from $400 to $5,000 per person, said Amazon.
As shoppers continued stocking up, services like Prime Now and the Amazon Fresh grocery delivery reported limited availability for several days. Some outlets were unable to make deliveries at all.
Meanwhile, the increased consumer online demand poses logistical challenges. Amazon is working to avoid supply chain disruptions. Some factories in China and elsewhere remain offline.
As conditions worsen, some fulfillment center employees may not be showing up to work. Amazon relaxed its attendance policy for warehouse workers, allowing them to take unlimited unpaid time off through the month of March.
As difficult as this pandemic is, it might serve to wake up people to the delicacy of national and international supply chains, suggested King. While consumers love the ease of shopping online and handiness of having goods delivered to their doors, those services are built on the backs of hundreds of thousands of faceless employees who are just as prone to illness and subject to family emergencies as anyone else.
“Hopefully, this experience will inspire at least some people to regard those workers and companies with additional compassion,” he said. “Though it’s also likely that many will simply be frustrated and angry with being inconvenienced.”
Amazon’s dilemma reflects a trend at other online retailers and painfully visible at brick-and-mortar retailers: empty shelves.
Amazon’s stock of general staples, such as bottled water and cleaning and antiseptic supplies, already is low. Given its size and breadth, it was left a bit flat-footed by the onset of the pandemic, according to Peter Edlund, chief solutions evangelist at supply chain integrator
“They will likely have to take a page from grocers and other critical suppliers and hyperfocus on the essentials. They will also likely need a contingency plan around e-commerce deliverers who might be carrying the virus,” he told the E-Commerce Times.
The supply chain impact is occurring both upstream and downstream due to the coronavirus, observed Mitchell Bailey, chief operating officer at
Etailz. Many of his brand partners have seen factory reductions ranging from 30 percent to 50 percent in production output. Although this situation has begun improving, many factories are still hindered.
“On the other side, we are seeing heightened demand across a few different categories on Amazon, including Health and Personal Care, Sports and Outdoors, and Baby products,” Bailey told the E-Commerce Times. “Some smaller subcategories within these verticals have seen 90 percent growth rates given customers taking larger positions on their purchases.”
Etailz is working with its brand partners to forecast demand that effectively will plan the supply chain and minimize out-of-stock exposure on the Amazon platform, Bailey noted.
Dealing With Damages
The biggest problem Amazon is going to face is the damage to its reputation, suggested Shayne Sherman, CEO of
TechLoris. Up to this point, Amazon has been the default when it comes to online shopping.
“This means that while we may search other places initially, we always had Amazon there in the back of our minds as Ol’ Reliable. It was never a consideration that Amazon wouldn’t have it. Now, suddenly, they really don’t have it,” he told the E-Commerce Times.
Consumers need to realize that there are going to be delays in filling orders, regardless of the outlet. An order for 145 rolls of extra soft toilet paper arriving in two days by drone delivery isn’t going to happen.
“We may actually have to wait for the manufacturer to play a bit of catch up first,” said Sherman.
Consumers should reset their expectations around delivery, including Amazon Prime delivery, suggested DiCentral’s Edlund. Shipments already have been delayed, or in some cases lost, due to the overwhelming demand.
Supply Chain Woes
The online shopping stampede will solidify Amazon’s partnerships with third-party sellers. Amazon is going to be floated substantially by third-party sellers that are able to hold onto their products longer due to back stock or higher prices, noted Chris Palmer, CEO of
“Third parties provide a deeper supply than if Amazon was solely a first-party seller, and third parties will protect Amazon from a shortage of inventory longer during the crisis,” he told the E-Commerce Times.
Without third parties, Amazon would be much more exposed during this situation than it is right now. The current surge will have as significant an impact on Amazon Prime subscriptions as Amazon Prime Day has in the past, he predicted.
“There will be millions of new Prime customers. There will be a higher adoption rate for e-commerce shopping, a trend that will continue far beyond this crisis,” Palmer said.
Online Shopping Flood
To illustrate the impact of panic buying in the wake of the COVID-19 pandemic,
Bloomreach pulled online revenue sales data for common stockpile items for the week of March 8-14.
The firm gathered the data from its customer base — which includes 250-plus retailers. The company’s technology powers on-site search and merchandising, so it has access to real-time searches and sales. The data includes revenue-based online sales across the globe, with a strong U.S. component.
Sales revenue increases from the week prior:
- Toilet paper and paper towels: 279 percent
- Vitamins: 166 percent
- Pasta: 132 percent
- Hand soap: 105 percent
- Zinc supplements: 104 percent
- Canned food: 102 percent
- Disinfectants: 84 percent
- Gloves: 67 percent
- Tissues: 41 percent
- Paracetamols: 37 percent
- Pedialyte/Gatorade: 33 percent
- Bottled/packaged water: 29 percent
- Masks: 13 percent
- Hand sanitizers: 6 percent
- Clorox/Lysol wipes: 5 percent