Amazon’s new policy to prioritize shipments of essential items dominated headlines over the past week, but there is another side to the story. Many merchants have certainly been disrupted by this hopefully temporary change. Amazon had to roll out a policy that was known by the company to be incredibly disruptive to merchants - because Amazon is dealing with unprecedented demand from shoppers who are looking for a safe and reliable place to shop. And as the retail landscape shifts quickly, brands and merchants need to adjust their business strategy accordingly.
Amazon channel sales are strong for many brands
The experience of clients at my agency, Bobsled Marketing, points to most brands actually seeing an increase in sales. Across 40 client accounts (which cover most verticals) that we analyzed, nearly half (48%) had seen increased sales in the past 4 weeks, while 35% saw decreased sales and 18% are steady.
The self-reported confidence of the Amazon channel for these brands is also high. 47% of our clients said their Amazon channel sales are higher in comparison to other channels, while only 23% of brands said that their direct-to-consumer and wholesale channel sales were up.
Equity analyst group Cleveland Research Company shared in a webinar last week that 55% of respondents in their benchmark report described an increase in their Amazon channel sales in March due to COVID-19, and only 20% reporting a reduction in sales.
Some companies need to rationalize their sales channels: while their brick & mortar retail accounts start to shrink their Purchase Orders, they may need their Amazon channel to fill in the gaps. There’s likely some channel-switching happening as shoppers transfer purchases they’d otherwise make in the store, to an online setting like Amazon. Panic-buying also likely plays a role. But many commentators think that many shoppers will permanently maintain at least some of their buying activity online - leading to a sustained shift to online shopping.
PARIS, FRANCE - MARCH 22: A delivery man wearing a protective mask carries an Amazon package on ... [+]
Shoppers see Amazon as a safe haven
During uncertain times, consumers are looking for safe and reliable places to shop, whether that’s for pantry essentials, to work on neglected home improvement projects, to educate their children, or to fit out their home gym. Purchases in these categories have skyrocketed, along with other non-obvious purchases like walkie-talkies and handicraft supplies.
Although much has been made this week of the fact that Amazon is extending shipping times on many items, up to a month in some cases, consumers still want to make purchases on Amazon. “I shopped around on Walmart, Target, and other online retailers but still found the best price [for a desired purchase] on Amazon,” said one colleague. “Although the delivery date was a month out, I still found it to be the best option. Then I received a notice two days later saying my order had shipped anyway.”
Other users on Twitter cite similar instances:
Customers also reported that delivery windows are often faster if items are shipped to Amazon Lockers.
Amazon has (and possibly will again in the future) throttle speed of non-essential items, and shoppers will be okay with that. Very few merchants are able to offer an equally reliable service during this period of disruption, where other mail carriers have revised their delivery guarantees and service level agreements.
Brands need to be visible and available in the locations that shoppers trust the most. During this period - and likely beyond it - shoppers are increasing their reliance on Amazon and other trusted marketplaces to care for themselves and their families.
Amazon is better-prepared for this situation than almost any other company
Amazon has made such advances in the area of logistics automation that their fulfillment centers are run with as few human beings as possible. This reduces reliance on workers to handle every essential task. That said, to cope with the recent swell of demand, Amazon plans to hire 100,000 new workers in the coming weeks. The company also plans to give a pay rise to hourly workers. Perhaps this is to offset the increased risk that workers face while being at work and exposed to surfaces and other people who might be carrying the virus.
Either way, Amazon has both the technology and workforce to manage elevated demand. Brands and merchants do not have the level of redundancy that Amazon has in its 130+ fulfillment centers around the U.S.
Amazon also owns a lot of its logistics infrastructure. From fleets of planes and tractor-trailers to subcontracted vans delivering packages to front doors. Because of Amazon’s line of sight from warehouse to doorstep, and its ability to deliver necessary household items and food, the company’s logistics services are considered “essential business” in every part of the U.S. that currently has restrictions on public movement.
Bezos also announced publicly over the weekend that “my own time and thinking is now wholly focused on COVID-19 and on how Amazon can best play its role.” Even critics would agree that Bezos is one of our era’s best business minds and problem solvers. It’s a strong indication that Amazon will be at the forefront of some innovation related to COVID-19, whether that’s simply opening up logistics capacity to supply essential equipment, or something more groundbreaking like facilitating medical treatment.
Will Amazon benefit from this event? Most likely, yes. A significant amount of Amazon’s brick and mortar competition will be under threat in the coming months as shoppers stay home. Order volume is significantly up, and we could see a permanent change in buying behavior that falls in Amazon’s favor. This is a reason for brands to embrace the huge step-changes that are happening in our economy, rather than resist them.
