Industry and general business media have been reporting that even Amazon.com, with an estimated 40 percent U.S. market share in online retail fulfillment, is not immune to the unprecedented panic buying related to pandemic preparedness across the United States.

The online provider has communicated to customers that Amazon Prime shipping standards can not be adhered to with the current volume of online demand and incurred stockouts of certain household staple, cleaning and medical supply product categories. In a published web site COVID-19 Statement appearing yesterday, the online retailer communicated:

As COVID-19 has spread, we’ve recently seen an increase in people shopping online which has had an impact on how we serve our customers. So, in the short term, we are making the decision to temporarily prioritize household staples, medical supplies and other high-demand products coming into our fulfillment centers so we can more quickly receive, restock and ship these products to customers. Products already on its way to our fulfillment centers will be accepted. This does not impact products being delivered to customers, or products currently in stock in our store. Customers can continue to buy any in-stock product in our store, and we will continue to deliver them.

The action will remain in effect through April 5, 2020.  Amazon Prime

The company additionally announced plans to immediately recruit an a upwards of 100,000 workers in the U.S. in anticipation of heavier volumes of online buying as the U.S. population is increasingly being asked to work or distance themselves in personal residences.

The online provider further committed to raise compensation pay by $2 per hour for employees in customer fulfillment centers, transportation and logistics in the U.S. and Canada, and by other equivalent rates among EU countries. That action remains in effect until the end of April and represents an additional $350 million in compensation costs.

According to the online retailer, any worker testing positive for COVID-19 will receive up to two weeks compensation while in quarantine with unlimited unpaid time off for all hourly employees through the end of March.

Amazon continues to take termed aggressive actions against hosted sellers perceived to be practicing price gouging of critical products in demand.

The retailer further announced the establishment of the Amazon Relief Fund, with a $25 million initial contribution, focused on supporting independent delivery service partners and their drivers, Amazon Flex participants, and seasonal employees under financial distress. The retailer will be offering all 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 our employees and contractors around the world who face financial hardships from other qualifying events, such as a natural disaster, a federally declared emergency, or an unforeseen personal hardship.

 

Implications

The move itself has implications, especially for the many hosted sellers within the Fulfilled by Amazon service category. Such sellers are estimated to provide up to half of Amazon’s order volumes. Many of these sellers reportedly responded angrily to the action, many complaining of little warning and of jeopardizing their business opportunities.

Sellers that expect overdue inventory ordered from China are especially concerned that as factories in that country begin to resume shipments, there will need to be an alternative source for warehousing and online order fulfillment, adding to overall costs.

A further implication is within Amazon itself, as the online provider attempts to crank-up a response to an obvious market need. There are already reports of workers in the U.S. and other countries becoming increasingly concerned about the safety of Amazon’s operational work areas amid the spreading of coronavirus, but the retailer has indicated that stepped-up cleaning and sanitary measures have been in effect, as is employee health checks.

 

Added Thoughts

During the COVID-19 coronavirus outbreak across China resulting in government mandated population lock downs across certain regions of that country, online providers’ Alibaba and JD.com were similarly slammed with a spike in online customer orders as lockdowns became mandated. Demand spiked for needed household items, sanitary and cleaning products as well as varieties of food from consumers not allowed to venture outside. Both online providers while initially struggling, managed to accommodate online needs with a variety of invested advanced digital and logistics capabilities.

This week, in a published Harvard Business Review commentary, INSEAD Professor Chengyi Lin attributes the success of the China online providers to the digital online maturity of China’s consumers. He observed:

U.S. consumers have been much slower to shift to the digital marketplace in these categories (grocery and food) than the Chinese, while last-mile logistics for the grocery category have yet to reach the standards seen in China’s major cities. Even in the restaurant business, the likes of Uber Eats and others lag far behind China’s MTDP, Ele.me, and many other similar services in China.”

 

We in the U.S. are about to get our lessons related to the ultimate stress of online buying manifested on Amazon.

 

Bob Ferrari

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