Meeting Demands as an Essential Service
With more than 300 million people ordered to stay at home to prevent the spread of COVID-19, Americans have turned to Amazon as a necessity for survival rather than a convenience. Accounting for 40 percent of all US online retail sales before the pandemic, Amazon’s consumer spending is now up 35 percent from the same period last year1. Inundated by consumer orders, the retail giant is grappling to meet demands and deliver to customers on time. These struggles have also taken a toll on its strategy to take on the big two rival shippers – FedEx and UPS.
In 2018, Amazon launched Amazon Shipping, a service that would compete with FedEx and UPS by delivering packages from third-party companies that sell on Amazon’s site, but don’t store their products at Amazon warehouses. A difficult decision for the company, Amazon recently reported it told these vendors it was suspending that service starting in June. By temporarily shelving Amazon Shipping, the company will be able to devote all resources to keep up with its current orders.
In order to handle the surge in consumer demand, Amazon is also making changes to its Amazon Fresh and Whole Foods services by interrupting new signups. New customers are being put on a waitlist and will be required to have an invitation to sign up before they are able to shop these services. Responding to COVID-19 has also prompted Amazon to make another adjustment that includes postponing Prime Day from May to at least August this year.
On the brighter side, Amazon announced on April 13 that it will begin allowing third-party sellers to resume shipping nonessential items. This comes after its March 17 announcement that U.S. and U.K. warehouses were no longer receiving “nonessential products.” Its decision in March was in an effort to prioritize shipping items such as cleaning products, health-care items and shelf-stable food from its warehouses.
In addition to the daunting task of maintaining the business model during this economic turmoil, Amazon is also doing its part to support its customers as well as employees in response to the COVID-19 crisis.
What Amazon is doing for customers2:
- Increasing capacity for grocery delivery from Amazon Fresh and Whole Foods Market as quickly as possible.
- Enhanced cleaning at all Whole Foods Market stores and now open one hour earlier than usual for customers who are 60+ years old in the U.S. (70+ years old in the UK).
- Customers ordering delivery from Prime Now, Amazon Fresh, and Whole Foods Market can select “unattended delivery” during checkout if they prefer not to come into contact with others.
- Focusing on high-priority items to ensure the fastest delivery of household staples, medical supplies, and other high demand products coming into fulfillment centers.
- Combating price gouging to help protect customers, help ensure fair pricing, and combat those seeking to profit off the COVID-19 crisis.
- Giving customers more time to return items.
What Amazon is doing for employees3:
- Made over 150 process updates to help protect employees — enhanced cleaning and social distancing measures, to piloting new efforts like using disinfectant fog in New York fulfillment center.
- Distributed personal protective gear, such as masks for its employees, and implemented temperature checks across operations worldwide.
- Working on building scalable testing for coronavirus.
- Added 100,000 jobs and are adding 75,000 more, to help meet customer demand and assist existing employees fulfilling orders for essential products.
- Increased pay for hourly employees by $2/hour in the U.S., C$2/hour in Canada, and €2/hour in many EU countries.
- Doubled the regular hourly base pay for every overtime hour worked and offering extra time off with full pay for those diagnosed with COVID-19.
- Established a $25 million relief fund for partners (e.g. delivery drivers) and seasonal associates who face financial hardship or quarantine.
With Amazon taking a back seat to the home delivery game, and the demand from online retailers as well as brick-and-mortars continuing to increase, FedEx and UPS will need to increase their capacity. We’ve already seen FedEx and UPS impose new surcharges in response to delivery during the COVID19 pandemic. As the circumstances continue to develop, it’s important to pay close attention to communications and invoices from your Carriers in order to not get blind-sided. Though this crisis is unprecedented, LJM’s extensive experience allows us to know what to look for and how to respond in order to best manage shipping spend.
1 According to Facteus First Report: Consumer Spending Overview