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Amazon’s Big Breakdown

The pandemic briefly brought the Everything Store to its knees — by prematurely bringing about a future it has long been planning for.

Illustration by Tyler Comrie

Amazon’s Big Breakdown

The pandemic briefly brought the Everything Store to its knees — by prematurely bringing about a future it has long been planning for.

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In the middle of March, as Americans faced down a terrifying pandemic caused by a novel and poorly understood virus, only one choice felt certain, or at least safe. It was time for America’s all-­purpose disaster response; it was time to stock up. But this time-­honored routine was newly challenging. The broad, sterile, fluorescent aisles of supermarkets and big-box retailers suddenly felt more like viral gantlets. In some cities, lines stretched out the doors, suggesting chaos and barren shelves inside. In many states, whole categories of brick­and-­mortar retail were shut down, either voluntarily or by edict. It was, at perhaps more than any moment in its history, Amazon’s time to shine.

At the online retailer, however, things were not going well. For many shoppers, it was the first place to turn, but demand for certain items was overwhelming the company’s ability to fulfill orders, not just for panic buyers but in general. By March 17, Amazon had suspended shipments to its warehouses of items that were not in ‘‘high demand,’’ scrambling, and often failing, to keep up with orders for soap, sanitizers and face masks, as well as a wide range of household staples, including food. By then, customers looking for these items were, for the first time, experiencing an Amazon that was conspicuously broken. Empty shelves in a supermarket are self-­explanatory. But on Amazon, customers were confronted with failures that were much weirder and harder to understand, with, of course, nobody around to explain them.

Searches for antibacterial soap and hand sanitizer turned up page after page of irrelevant products, scams and overpriced items with shipping times weeks or months in the future. (By the end of March, the company said it had removed over 3,900 seller accounts and half a million products in the U.S. for price-­gouging alone.) As time went on, widening shortages told the story of customers’ evolving attitudes, lifestyles and needs in the time of ­Covid-19: webcams, exercise equipment, video-­game consoles, diapers, bleach. (By April, hair clippers.) In categories under high demand, well-known brands appeared to be sold out, as were direct competitors, also-rans and half-­related items. By May, some customers searching for hand sanitizer were still being presented, on the first page of search results, with Kindle ­e-books about how to mix it at home.

Here, in a time of crisis, Amazon’s vaunted e-­commerce machinery was failing, and at the very tasks for which its millions of customers flocked to it. All of a sudden, the Everything Store wasn’t even as well stocked as, say, an urban corner store, or a gas station, or a smaller online retailer. To customers trying to place orders, it didn’t just seem overwhelmed — the site seemed broken, more like a sprawling, malfunctioning machine than a retailer under unusual stress. More than just failing them, it seemed to be exposing them to scams and exploitation, a peculiar sort of store that seemed to have lost control of its own shelves. There were signs of distress in Amazon’s vast network of fulfillment centers, too. Employees were falling ill. Some workers were staying home out of fear for their own health; others staged walkouts.

In so many ways, this was the future Amazon had been planning for: Brick-­and-­mortar stores were closed, consumers were eager to order all manner of things online and the brand was all but synonymous, already, with e-­commerce. And yet in a statement released with Amazon’s first-­quarter earnings, the company’s chief executive, Jeff Bezos, braced investors for a rocky period. ‘‘If you’re a share­owner in Amazon, you may want to take a seat, because we’re not thinking small,’’ he said. About $4 billion in expected operating profit for the next quarter — ‘‘and perhaps a bit more’’ — would instead be absorbed into Covid-­related expenses. The company had experienced a surge in demand, but quarterly operating income had fallen by 43 percent in North America year over year. Internationally, it had lost money. In the statement, Bezos praised his company’s ‘‘adaptability and durability’’ but said the Covid crisis had been ‘‘the hardest time we’ve ever faced.’’

In April, however, Amazon announced that it had hired 175,000 workers in its fulfillment-­and­delivery network — a sign of supreme confidence. Wall Street, too, has proved to be more confident in the company than ever; after a brief dip at the height of Amazon’s Covid-­related troubles, the company’s stock price is hovering near a record high, assuring Bezos’s status as the richest person in the world by a large margin. Indeed, few doubt that Amazon will overcome this ‘‘hardest time.’’ To customers and investors alike, the company has long been the alternative to modes of shopping that may now be in accelerated and terminal decline. But for a few weeks, Amazon — the borderline-­magic website that makes things appear on your doorstep — showed us what it was really made of, revealing something more complicated and delicate than its seamless surface usually lets on: machinery half-built and already straining under its own success, supported by an army of invisible middlemen and kept running by hundreds of thousands of workers.

As of its most recent disclosure, Amazon employed 840,400 workers around the world. More than 150 million people subscribed to Prime, paying an annual fee in exchange for, among other things, access to free, fast shipping. In recent years, Amazon has been scaling up aggressively in virtually every dimension that matters: Each year, its systems are bolstered to handle more people, more demand, more volume, more stress. Since 2014, its revenue has tripled.

Entering 2020, well into its third decade of ruthless expansion, Amazon was operating with a powerful tailwind. More Americans were doing more shopping online; its biggest online competitors were still hopelessly behind; the collapse of American brick-­and-­mortar retail — Amazon’s true competition — was accelerating, and its acquisition of Whole Foods had successfully given the company a way into another industry on which it had ambitious designs. For regular customers, ordering from Amazon is less an experience than a routine — a repetitive, second-­nature interaction with a machine that brings you things; a faint but recognizable consumer version of the processes that repeat, ever faster, in Amazon’s warehouses.

It benefits Amazon to be understood as an online store because it leads to underestimation. Amazon competes with Walmart, but Walmart isn’t its competition — at least not in the way that Target was to Walmart, or Walmart was to Kmart. Rather than a retail operation with a website, Amazon is better understood as a set of far more ambitious commerce-­related systems overseen by a single company. This arrangement might be easiest to see in Amazon Web Services. Through A.W.S., Amazon rents hosting and computing infrastructure to companies big and small. Instead of buying, operating and updating their own data centers, clients including Netflix, Apple and the United States government rent space and computing power from Amazon. Where possible, Amazon engages with this infrastructure as something like a customer. Netflix runs on A.W.S. — but so does Amazon’s Netflix competitor, Prime Video.

Beneath the surface, Amazon’s retail operation works in much the same way. It is not a unified retail company through which Amazon sells products it has sourced or manufactured itself. It’s a platform connecting millions of customers with millions of sellers — none, of course, as large as Amazon itself. In exchange for a fee, Amazon lets a wide variety of parties sell goods through Amazon, right alongside those sold by Amazon. In exchange for more fees, Amazon will let you advertise those items against others, and its own. In accordance with another fee structure, Amazon will receive your products into its warehouses, process your orders and ship them to customers with the urgency associated with Amazon Prime, with which your listings will be badged. More than half of the products sold through Amazon are sold by third parties, many of which are effectively leasing floor space and logistics capacity — not computer servers but an actual work force — from the company. For brands and manufacturers, not entirely unlike regular users, Amazon is a thing you sign up for and give money to and then live inside, and with, for better or for worse.

Amazon’s systems are designed to scale up without clear limits. ‘‘On the internet, companies are scale businesses, characterized by high fixed costs and relatively low variable costs,’’ Bezos told Businessweek in 2001. ‘‘You can be two sizes: You can be big, or you can be small.’’ Amazon, two decades later, is a collection of systems that are either already big or that Bezos believes might one day become big: its stores, including Amazon, Zappos and Whole Foods; Amazon Web Services; its media platforms, Prime Video and Music, the Kindle store and Audible; its newer acquisitions and platforms, like the streaming site Twitch, or Ring, the home-­security-­camera company. Most Amazon investments are engineered for the possibility, at least, of category supremacy. Some have already achieved it.

Amazon’s oldest and most important marketplace, of course, is the one that already makes it the largest online retailer by far; it’s a system designed to gradually accommodate the decades-­long shift away from brick-­and-­mortar retail, in as many ways and to the greatest extent possible. Before ­Covid-19, the outlook for the retail industry was grim. Now it’s apocalyptic. Analysts at the investment bank UBS said they expected around 100,000 American stores to close permanently over the next five years. About 2.1 million retail jobs were lost this April alone. A report by the real estate research firm Green Street Advisors suggested that 50 percent of the department stores anchoring American malls would close by the end of 2021, darkening the already dim projections for their other tenants.

As recently as 2018, in a letter to shareholders, and in the context of increasing scrutiny from politicians, Bezos was returning to a favorite refrain. ‘‘Amazon today remains a small player in global retail,’’ he wrote. ‘‘We represent a low-­single-­digit percentage of the retail market, and there are much larger retailers in every country where we operate. And that’s largely because nearly 90 percent of retail remains offline, in brick-­and-­mortar stores.’’ The UBS report suggests that post-­pandemic, by the end of 2025, that number could be as low as 75 percent. By the end of April, according to Earnest Research, total offline sales were down by more than 20 percent, year over year; online sales were up nearly 20 percent. (While Amazon’s competitors saw greater proportional increases in sales, Amazon’s increase in sales dwarfed their totals.)

In other words, April 2020 wasn’t far off from where things might be in 2025 or even 2030. When millions of people showed up five or 10 years too soon, Amazon’s systems weren’t ready to accommodate them. The burden of this surge tested Amazon from top to bottom, pushing to the breaking point not just the Amazon most familiar to customers but also the less-­visible systems that keep it running: its warehouses and the employees who operate them; the complex and suddenly confused software that generates Amazon anew, constantly, for its customers; and, crucially, its vast network of small sellers, who, just out of sight and mostly out of mind, carry Amazon on their backs.

Illustration by Tyler Comrie

A majority of products sold on Amazon are not sold by Amazon but rather through it, by an army of hustling merchants. Conceptually, this part of Amazon is closer to eBay or even Etsy, but Amazon tends to conceal those similarities. Imagine a listing on Amazon — say, a pack of eight bars of antibacterial soap. From a customer’s perspective, clicking ‘‘Buy Now’’ does what it says it does: Amazon will charge you $5.19 to ship the soap within a specified time frame. Behind the button, however, is a competition: in this case, between several different sellers, including Amazon itself, each with its own supply chain. Amazon selects one automatically.

These sellers compete on price, shipping time and customer ratings, among other factors. Some of these sellers pay Amazon to warehouse, handle and ship their products, for a fee; others don’t, but in doing so forgo ‘‘Prime’’ branding, and often their chance of winning the auction. But now imagine that the first seller, Amazon, is out of stock. Maybe the price goes up. Imagine that the second and third sellers, both shipping through Prime, are out, too. This is what the pandemic did to the system: A real-time bidding process designed to keep prices and shipping times down was now, instead, dealing with widespread shortages and creating what might have looked to customers like automated price-­gouging. As every retailer struggled to keep pandemic essentials in stock, Amazon’s challenge was to keep a complex, interconnected and broadly ill-­prepared marketplace, with millions of independent actors on which it relied for much of its recent growth, from breaking down completely.

According to estimates by Market­place Pulse, an e-­commerce research firm, a third of the top Amazon sellers — those doing more than $1 million in annual U.S. sales — are based in China, bidding abroad for algorithmic supremacy and relying on Amazon to handle nearly everything after their products reach the U.S. In calmer times, this globe-­spanning complexity is mostly invisible to the customer, who experiences a familiar, quick transaction and, in many cases, opens an Amazon-­branded box, shipped from an Amazon facility, maybe even delivered by an Amazon truck.

In contrast to the relatively straightforward and deliberately low-stress buying experience on Amazon, selling on Amazon is complicated, hugely competitive and populated by a wide range of actors: inventors hoping to sell a genuinely unique product alongside agnostic hustlers who base their entire businesses on what analytics software tells them is doing well on Amazon that week. In a common American seller model, the seller spends her time devising a plan to break into Amazon’s search results or find a way into a growing category; she finds a manufacturing partner in China; Amazon handles the rest. A model for a Chinese seller inverts this, hiring Americans to sort out trademarks, translations and sometimes marketing, while she figures out the manufacturing through local connections and lets Amazon handle everything after the product leaves port.

Amazon sellers are encouraged, both explicitly and implicitly, to operate like miniature Amazons; that is, keeping product inventory no higher than it needs to be to meet expected sales. Amazon charges sellers who are part of Fulfillment by Amazon, or F.B.A., by the amount of warehouse space they use, so if they have reliable shipments coming from a manufacturer, it’s cheaper to cut things close. Everyone who does business in China knows to take the Lunar New Year’s interruptions into account, but this year, rather than reopening after the holiday, many factories in China stayed closed. The resulting product shortages affected virtually every major retailer, but they hit Amazon twice: It wasn’t just suppliers going offline or vendors passing along their own manufacturing delays. Sellers, who might otherwise act as an auxiliary force, simply ran out of goods.

Successful merchants are used to guessing at how the systems that govern Amazon’s marketplace work, and establishing a good reputation and gaining a foothold in Amazon’s search results can take years. Suddenly, these systems seemed confused. Sellers reported being suspended for sudden surges in sales. Others were accumulating negative feedback as shipping dates lagged, out of their control. Some fretted about plummeting Inventory Performance Index scores, which Amazon uses to rate how well sellers meet demand. They watched search rankings for their listings fall and worried about the long climb back.

As Amazon’s breakdown created surreal outcomes for customers, it was breaking down in strange and unpredictable ways for sellers, too. Rachel Johnson Greer, a former Amazon employee who now advises sellers, saw some of her formerly successful clients having terrible months and others having great ones, depending on new factors: whether they had inventory stored in the U.S.; whether their product had been deemed essential by Amazon (soap, beauty products and sex toys were; folding cots, though in high demand, were not). Then there are the algorithms that determine what a customer sees when he searches through Amazon’s vast library of goods. ‘‘There are 10 or 20 inputs that decide how a product shows up,’’ Greer said, and the pandemic has thrown some of them completely out of whack. ‘‘The system is so automated, they can’t turn it off.’’

For some sellers, it was a bonanza. Peter Spenuzza, the founder of the health-food company Rise Bar, saw protein-­bar sales surge: He’s pretty sure it was considered an essential product; more important, it was manufactured in the U.S., and it was in demand. One of his listings suffered, he thinks, for temporarily selling out, but the rest more than made up for it. He said that in the future, he’ll be shifting more of his business over to Amazon. But on Amazon’s seller forums, others were losing patience.

‘‘The vast majority of my inventory is held hostage at F.B.A. warehouse,’’ one seller wrote in April. ‘‘My message box is full of messages from customers asking where is their stuff,’’ the seller said. ‘‘It is becoming more and more apparent that we are just a number.’’

In its latest financial disclosure, Amazon claimed a physical footprint for its facilities at more than 333 million square feet worldwide, with more than 192 million square feet categorized as American ‘‘fulfillment, data centers and other.’’ To customers, Amazon is most visibly a website, an app and a bunch of boxes. To many of its employees, it’s a network of hidden 24-hour cities.

In mid-March, before many state and local lockdowns were in effect, Street­Light Data, an analytics firm that uses app-­location data to track how much people travel, started to notice a sharp decline in movement. By late March, it reported that daily miles traveled fell to around four billion from 15 billion. It was the lowest road activity the firm had ever seen. As Street­Light looked deeper into the data, however, it found pockets where there was no decline at all, and in some cases an increase in activity. A few streets on Staten Island, for example, were still bustling: Gulf Avenue, Chelsea Avenue, Fifth Street and Sixth Avenue. They all led to one place: JFK8, Amazon’s new state-of-the-art fulfillment center, which employs about 4,000 people full time, the only Amazon fulfillment center within New York City’s five boroughs. While overall vehicle traffic on Staten Island had fallen to around one-fifth of its usual levels, activity around JFK8 was elevated by 25 percent in March and then 34 percent in April.

Derrick Palmer works in the ‘‘pick’’ department at JFK8. In most Amazon warehouses, this job would entail walking miles a day between shelves, searching for items to be collected and handed off for packing. At JFK8, which opened in 2018, robots bring sections of shelves, each loaded with bins, to Palmer, who removes the products and places them in a yellow plastic box, or ‘‘tote,’’ which is then whisked away immediately by a conveyor belt. It’s exhausting work — the literal mileage once demanded of human pickers has been replaced with a test of dexterity and endurance.

‘‘You’re judged by your rate,’’ Palmer said. ‘‘Everything is on the screen, the amount of units you did, the time at the station.’’ Through the screen, he is reminded of his ‘‘takt time’’ — basically, his time per given task. (‘‘Takt’’ is derived from the German word Taktzeit, sometimes translated as ‘‘clock interval,’’ an industrial-­process concept popularized in German and Japanese wartime manufacturing.) He knows he needs to hit 325 totes an hour, about one every 11 seconds; it has been suggested to him by management that a good target is about 400, or one every nine seconds. ‘‘Hitting your rate is a little difficult,’’ he said. ‘‘People well over 60 are held to the same standard as someone who is 25.’’ (Palmer is 31.) A lot of them can’t quite keep up, he said, which is a good way to get written up, which is a good way to get fired.

Palmer has been able to keep up and has worked at Amazon for a few years now. What happened, he said, was like Christmas in April, during a pandemic. December is the busiest time of year at Amazon fulfillment centers, which in 2019 added 200,000 seasonal workers to meet holiday demand. Palmer said he has noticed many new people around — Amazon needs the extra help but also needs to replace workers who have quit, stopped showing up or become sick. JFK8, with its four sprawling floors and thousands of employees, is as busy as he has ever seen it.

In March, rumors of infections at JFK8 were spreading among employees, who, according to several I spoke with, were getting conflicting reports from their direct managers: two positive cases; 10; more. (Amazon says that when a ­Covid-19 case is confirmed in one of its buildings, it communicates this information to all employees who work in that building.) Outside of work, it seemed as if everyone knew someone who was sick; as the month progressed, hospitals in New York were flooded, and daily deaths were rising rapidly.

To the fulfillment-­center staff, it was clear that Amazon was already responding to the pandemic on behalf of its customers — it was increasing hiring and holding classroom-­style group orientation classes as usual. Workers were showing up for their shifts in large groups and gathering during breaks and in the lunchroom. (Amazon says it implemented social-­distancing guidelines on March 15, including staggering shifts and spreading out break-room tables.) Sick pay was available for workers who tested positive for coronavirus, but some still went to work pending their results. Some started taking leave and using vacation days; others noticed managers going home too and started wondering if they should be doing the same.

As they waited, it became clear to some workers that they were Amazon’s response to the pandemic. On March 30, a week after Amazon confirmed its first case to JFK8 workers, an employee named Chris Smalls, citing worker-­safety concerns like a lack of protective equipment, led a walkout; about two hours after it ended, Smalls was told he had been fired. Earlier that month, Smalls said, he was in contact with a co-­worker who later received a ­Covid-19 diagnosis. Smalls was dismissed, officially, for ‘‘putting the health and safety of others at risk’’ by violating social-­distancing policies and a company-­imposed quarantine. (Smalls has described his firing as ‘‘targeted retaliation.’’) Notes from a meeting held after Smalls was fired, attended by senior Amazon staff as well as Bezos, were obtained by Vice News. In the meeting, David Zapolsky, Amazon’s general counsel, explained why the company should not shy from letting Smalls take the spotlight: ‘‘He’s not smart or articulate, and to the extent the press wants to focus on us versus him, we will be in a much stronger P.R. position than simply explaining for the umpteenth time how we’re trying to protect workers.’’ (In a statement, Zapolsky told Vice News that his ‘‘comments were personal and emotional’’ and that he was frustrated that an Amazon employee would put other employees’ safety at risk.)

By Smalls’s own estimation, his walkout numbered a few dozen at most, but multiple workers at JFK8 point to it as the moment Amazon started making meaningful changes. Workers are now supplied with gloves and paper masks. There are hand-­sanitizer stations set up around the facility, although they’re not always full. The company says it is cleaning the facility between shifts and is working ‘‘closely with health authorities to respond proactively,’’ by, among other things, tripling the size of the janitorial team.

In February, the company drew backlash by firing Justin Rashad Long, an employee who had called attention to working conditions at the facility, helping to renew a drive by the Retail, Wholesale and Department Store Union to organize workers there. ‘‘Normally, we’re reaching out to workers,’’ Stuart Appelbaum, the president of the union, said about Amazon. ‘‘Now, people are reaching out to us.’’ No Amazon warehouse workers in the United States are currently unionized, and the company has been aggressive in pushing back against workers’ efforts to do so. At Whole Foods, the company reportedly maintained a ‘‘heat map’’ of stores’ ‘‘risk’’ of unionizing, taking into account factors like local union membership, diversity (greater diversity is less ‘‘risk’’) and sales.

Appelbaum sees the pandemic as a possible turning point, not just for labor but for the public’s attitude about Amazon. ‘‘They feast on public subsidies, they avoid paying taxes and they mistreat employees,’’ he said. The pandemic, he added, ‘‘magnified the health and safety problems that were there already.’’ The workers’ demands during the pandemic are, by and large, unchanged: more safety; more attentiveness to worker health, both physical and mental; more pay, especially considering the risks they take on. If they have more leverage now, it may be fleeting, and it won’t be easy to use. In France, unions successfully secured a court order preventing the company from selling non­essential goods until new safety precautions were put in place. Amazon appealed the decision, saying it was ‘‘perplexed,’’ but lost. After the court order was issued, Amazon temporarily closed its six distribution centers, placed 10,000 workers on paid furlough and began applying for government assistance to pay them. (The employees returned to work in mid-May.)

In the month and a half after Smalls was fired, eight Amazon warehouse workers were reported to have died of ­Covid-19. The company has not shared how many employees have been infected or died; the company’s worst outbreak, at AVP1 in Pennsylvania, is estimated by local lawmakers to exceed 100 cases. Smalls is planning more labor actions and hoping to organize workers under a new banner — the Congress of Essential Workers. ‘‘We want to use a union­like structure but not call it a union,’’ he said. ‘‘A lot of employees at Amazon are afraid of unions.’’

Amazon is at the height of its powers, and many of the forces that might hold it back are in decline. Much of the retail landscape is in ruins, ready to be finished off, or acquired, by one of the few remaining giants. The president’s frequent broadsides against Bezos notwithstanding, Amazon is operating in a profoundly friendly regulatory and tax environment; at the National Labor Relations Board, charged with investigating labor complaints, Trump appointees are firmly in control. Millions of Americans are looking for work, and Amazon has more than a hundred fulfillment centers spread around the country, with more planned.

Then there are the customers. Amazon’s obsessive focus on making finding, purchasing and returning things online as easy and fast as possible has won it loyalty; its most fervent wish is to be taken for granted by shoppers, a casual faith that was shaken during the pandemic but will no doubt return. To the people who actually make the process work, this single-­minded focus on serving the customer reads differently. ‘‘I like to say they brainwashed us to think that we need it,’’ Smalls said. ‘‘One click to buy, and a package magically appears. It’s a luxury. The package you just ordered was handled by about six or seven people.’’

For now. Amazon is a leader in warehouse robotics and makes no secret of its desire to automate as much of its logistics operation as possible, in the name of customer satisfaction and, of course, to satisfy its patient shareholders. Until it can do that, however, Amazon needs workers. In 2020, they’re arriving into workplaces where their labor is both urgently needed and conspicuously treated as a problem to be eventually solved.

One employee at JFK8, who did not wish to be identified for fear of retaliation, described the material response as improving but inadequate. She has seen news reports about disinfecting and deep cleaning at her workplace but little evidence in person — she wipes down her station herself. At the beginning of her day, she’s given a baggie with two sets of plastic gloves and a disposable mask — this didn’t start until mid-­April. The word she kept using was ‘‘facade.’’ The media sees a facade. Rank-and-file employees see a facade. Customers, conditioned to click ‘‘Buy Now’’ without a thought, are interfacing with a facade. Amazon is none of the things people think it is — a website, a store, Alexa, a futuristic enterprise so novel and incomparable that it simply must be inevitable, delivery drones and all. Beneath its layers and layers of highly scalable systems, it’s hundreds of thousands of people still at work, packing boxes.


John Herrman is a media and technology reporter for The Times Styles. He previously wrote for the magazine about the tangled empire of the tech giants.