- Amazon remains one of the few companies to benefit from the coronavirus pandemic, with surging online sales helping it to report record profits in July.
- It didn't get there without navigating a slew of challenges, including a labor crisis that drew public scrutiny from lawmakers, regulators and workers rights groups.
- Amazon's supply chain was hit hard, resulting in delivery delays and out-of-stock notices.
The coronavirus pandemic has not only killed more than 1 million people around the world. It's also devastated the global economy, brought industries to a complete standstill, spurred mass layoffs and, in the case of retail, accelerated the slow-moving demise of already ailing department store chains.
Amazon is one of the few exceptions.
The e-commerce giant, with its seemingly endless selection and drive to deliver convenience and low prices, became the default retailer and an essential service for many consumers at the height of the coronavirus crisis.
Facing store closures and empty shelves, shoppers turned to Amazon first for products to protect them from Covid-19, like hand sanitizer, face masks and disinfectants. They stocked up on household products and groceries, then, as the crisis wore on, ordered office supplies and fitness gear to adjust to staying indoors. Between February and March, toilet paper sales jumped 186% on Amazon from a year ago, while cough and cold medicine sales surged 862% year over year, according to e-commerce services provider CommerceIQ.
The flood of online orders propelled Amazon to record sales during the second quarter. It then spent billions on coronavirus-related investments like safety gear for workers and its internal testing initiative, called Project Ultraviolet.
While the U.S. navigated widespread unemployment and economic turmoil, Amazon kept hiring. The company brought on more than 175,000 new warehouse and delivery workers between March and mid-April to be able to fulfill customer orders. Amazon added 36,400 people in the three months ended June 30, bringing its head count to 876,800, an increase of 34% year over year.
Amazon's pandemic-fueled growth isn't expected to slow down soon, especially as it prepares for the back-to-back shopping rush of Prime Day in October and the holidays after that. In fact, Amazon is expected to exceed $100 billion in quarterly revenue for the first time ever in the fourth quarter, according to analysts surveyed by FactSet. That would make it one of the very few American companies ever to cross that threshold, alongside Walmart and Exxon.
It wasn't a foregone conclusion that Amazon would thrive while many other companies struggled.
The surge of unexpected orders initially caught Amazon off guard. The company struggled to meet its vaunted two-day delivery window, which it promises to Prime members as part of their $119 annual membership fee. It quickly ran out of high-demand products like hand sanitizer and paper towels, combated widespread price gouging, and rushed to adjust operations inside its warehouses to keep employees safe without significantly slowing down the pace of work.
CEO Jeff Bezos acknowledged early on in the pandemic that the coronavirus upended Amazon's operations. "The current crisis is demonstrating the adaptability and durability of Amazon's business as never before, but it's also the hardest time we've ever faced," he said in April.
Bezos said his time and attention had turned squarely to Covid-19, away from longer-term projects and experimental ventures like his rocket company Blue Origin. Bezos and many members of Amazon's senior leadership ranks met daily to tackle inventory issues and discuss the latest coronavirus updates.
Global companies like Amazon are generally prepared for potential supply chain disruptions, but not like this one. Even Amazon, with its sprawling end-to-end logistics network spanning warehouses, planes, trucks and vans, wasn't able to keep operations steady.
"The first place where [the coronavirus] hit hard was their supply chain," said Guru Hariharan, a former Amazon executive and CEO of CommerceIQ. "Amazon's holy grail or crown jewel is the supply chain. It's still yet to sort of come to normalcy."
Amazon told its millions of third-party sellers that items like hand sanitizer and paper towels would take precedence in its warehouses, since those products were in such high demand. In April, Amazon began taking orders for nonessentials, but only in limited quantities.
Months later, Amazon is still working to recover from its inventory interruptions. Once it began allowing nonessentials, there was a backlog of inbound shipments, said Juozas Kaziukenas, who runs the e-commerce research firm Marketplace Pulse. The company continues to restrict the amount of goods sellers can store in its U.S. warehouses, as space in its facilities remains tight.
The pandemic showed that Amazon's decision to move its fulfillment operations almost entirely in-house can be both a blessing and a curse. Fulfillment by Amazon lets individual sellers ship their products to an Amazon warehouse and then Amazon ships the product to customers for a cut of each sale. The program allows Amazon to provide a consistent experience to Prime members.
"I think Amazon's fulfillment is its greatest asset and strength - it is the most sophisticated and efficient e-commerce fulfillment operation at least in the US - but at the same time, perhaps inherently, it is also Amazon's single point of failure," Kaziukenas said. "Any disruption to its fulfillment operations affects Amazon and its marketplace."
Amazon also has faced intense public scrutiny tied to its treatment of warehouse workers throughout the pandemic. Warehouse workers argued Amazon didn't do enough to keep them safe from the virus as they continued to pick, pack and ship out orders at a dizzying pace. Lawmakers, regulators, worker rights groups and some of Amazon's own corporate employees called on the company to take action.
The company said it implemented more than 150 process updates inside its warehouses to stem virus transmission, from enhanced cleaning and social distancing measures, to mask requirements. It also ramped up testing for the coronavirus among its workers, and was testing workers at nearly a dozen warehouses in July.
Despite these improvements, Amazon warehouses across the U.S. continue to report new cases of the coronavirus. At least eight Amazon employees have died from Covid-19.
Amazon also faces the possibility of new coronavirus outbreaks in the coming months, making Bezos' hope to conduct "regular testing of all Amazonians" that much more vital.