Amazon has clearly been the outstanding performer through the course of this global pandemic and has played an essential role in providing access to the supplies and necessities essential to daily lives. Like many retailers, it has been focused on initiatives to find solutions to the way that COVID-19 has reshaped shopping habits, industries and economies around the world. We’ve recently updated our 5-year forecasts to reflect the impact that COVID-19 has had on retail around the globe.
Amazon has had to react with incredible speed and even its not-inconsiderable supply chain and fulfilment capabilities have been tested. Despite being one of the best placed in terms of infrastructure and agility to respond to this unprecedented surge arising from this unplanned event (whereas Prime day and Cyber week were planned), much like other retailers, Amazon was still challenged by the sheer volume of demand.
Very focused demand on certain categories meant that Amazon had to react very quickly to combat issues that arose, to ensure that their platform and marketplace retained trust with shoppers. It was one of the first retailers to implement “price gouging” defense measures, and today continues its efforts in key categories such as hand sanitiser and masks, where some sellers were raising prices, or where the out of stocks led to higher price points as lower priced items sold out and came off the platform. Amazon were also quick to flag and take measures to rectify where sellers were inappropriately altering their product content to take advantage of the current situation such as, unauthorised medical claims that did not conform to safety standards, going as far as to put hold on 4000+ sellers and contacting customers who might have been affected.
Amazon also held off taking delivery of non-essential items to their warehouses and extending (even on Prime) delivery dates to 1+ month out in order so that they could prioritise essential high demand categories, with extra steps in France and Italy to stop shipping out to customers, going as far as to offer incentives for customers to postpone their deliveries. Finally, Amazon has postponed Prime Day, its flagship retail event, as well as removing certain promotions or deals from its platform during peak lockdown demand, to focus on shipping essentials to consumers.
Clearly fulfillment remains top of mind, as Amazon struggled to keep up with demand. Most recently, they also announced the intention to hire 100,000 extra employees, and raised wages, as well as to support the safety of their workforce, offering two weeks paid sick leave for workers that tested positive for COVID-19, all of which will have implications on its operating profit.
Across all consumer packaged goods, the latest 3-4 weeks on Amazon in both North America and Europe have beaten both Prime Day 2019 and Cyber Week 2019, previously the highest sales periods in history for those categories prior to COVID-19, which gives us an indication of the scope of the unplanned demand that Amazon has had to manage through.
Brands and retailers have had to prioritise essential SKUs for manufacturing and supply (including household tissue and tinned groceries), reallocating labour and resources where necessary in order to continue improving availability rates. As Amazon continues to focus on its coronavirus response, brands should prioritise staying in stock with key items, supporting the broader efforts of the platform and avoiding seeing digital shelf placement deterioration due to being out-of-stock.
Overall, brands can and should communicate frequently with retailers to identify and anticipate most in-demand products to increase capacity for and work together to implement strategies to balance in-store availability levels with increased online demand.