A Pandemic's Effect on Amazon and other Distributors
It's not an oxymoron to say that 2020's pandemic has been both detrimental and beneficial to Amazon. Their fulfillment center is one of the hundreds of thousands in the U.S, and they’re far from the only platform for online shopping. But they are one of the largest. They’re also currently one of the nation's largest private employers. Looking at their experience during the pandemic, we’d like to consider what results may or may not apply to other distributors and why.
Amazon's Business Growth during Covid-19
In mid-April 2020, Amazon's stock reached a record high. Their revenue was up more than 28% during the first months of the pandemic in the U.S. while the rest of the 500 companies listed on the stock exchange were averaging on a downward slope.
Because of measures such as stay-at-home orders and the "essential workers" distinction, brick-and-mortar retailers – many of whom were already struggling in a digitally-driven economy – experienced even more strain. Many businesses have closed or will close their doors indefinitely in 2020.
As you might imagine, Amazon will continue to benefit from this reality. They've attracted new online shoppers staying home. Although unemployment has also skyrocketed across industries, shoppers do not appear to be decreasing their spending. They temporarily shifted their shopping habits to focus on essential items but data already points to a return to non-essential, pre-pandemic shopping behavior.
Because of the increase in the demand for goods, Amazon hired more than 175,000 new employees during the pandemic.
Image credit from CNBC article by Annie Palmer
Amazon Struggles During Covid-19
Amazon also lost employees in 2020 who quit or were fired due to circumstances brought on by the pandemic as well as unrest well before that. Amidst the pandemic, they saw walkouts and small demonstrations across the country in cities like NYC and Seattle with employees claiming the company hasn’t done enough to protect its workforce from the outbreak.
According to Amazon’s own publications on their website, here’s what they have done to prepare and protect employees during the pandemic. They’ve:
- Invested in personal protective equipment
- Enhanced their facility cleaning measures
- Moved to less efficient process paths that better allow for effective social distancing
- Offered higher wages for hourly teams
- Extended double overtime pay
- Included more flexible leave of absence options, including policies that cover COVID-19 circumstances
- Developed their own COVID-19 testing capabilities
These measures totaled $4 billion dollars in what they call “COVID-related expenses.” This may sound like a lot however it’s barely 1% of their overall revenue.
Amazon also chose to relax their fulfillment policies because of supply-chain disruptions. Same-day or next-day delivery has been harder to come by in 2020.
Speaking of the supply chain, they also gave priority to sellers of essential goods leaving many other wholesalers who depend on fulfillment by Amazon left to figure out the logistics themselves and receiving less focus on the platform. This decision also led to unrest and chatter among sellers.
How might Amazon’s Experience Apply to other Distributors?
At WireCrafters, we have the privilege of providing equipment solutions to distribution centers across the U.S. We have our own warehouse and fulfillment too. As we look ahead at that industry and the effects a pandemic has on it, we’re wondering a few things about ourselves and our peers.
- Are we making the right investments in our health and safety measures?
For many distributors, less efficient process paths and additional cleaning are less costly than shutting down operations. But businesses in other industries cannot say the same. For us, we believe 2020 has offered the chance to think outside the box. We recently created a piece of equipment to help with physical distancing among employees, especially in the office setting. Amazon is a great example of innovation, but don’t be like Amazon and wait until employees raise their voices about the health and safety measures you provide for them.
- To what extent will longer fulfillment times be acceptable to buyers?
One of the greatest selling points of the Amazon brand is its quick turnaround time. Still, they’ve continued to grow for months without that ability. We think there is a sense of understanding among people everywhere during a difficult and unique time. We believe – and hope – that will benefit distributors other than Amazon.
- Will fewer brick and mortar businesses and more remote work impact my commodities?
Delivery of goods is more important than ever, especially goods that are relevant to current needs. We don’t believe that means only food and toilet paper. From the beginning, manufacturers have been “essential workers.” Equipment that keeps manufacturers going is an essential item. Protective equipment – even a concept as simple as employee separation panels – that allow people to continue their work is important. If you provide solutions that still apply to people during and after a pandemic, then your organization has a more certain future even in “uncertain” times.
- Can other distribution centers expand their workforce during a pandemic?
This all depends on how you answer the previous question. You may find the opportunity to expand your workforce if you choose to add new products or services. Also, businesses that shift their own business model may require new resources or equipment to support that. It’s these kinds of changes that may give distributors, as well as manufacturers, a way to expand, which is something our country really needs.
There are several points in Amazon’s recent history we can learn from. Ultimately, it’s our hope that distribution centers cannot only survive but thrive in 2020 and beyond.