How was Amazon affected by the pandemic?

In a 2020 poll by Convey, 80% of respondents reported fast, free shipping as the top reason they shop at Amazon. And those weren’t just empty words. PYMNTS.com published a report stating that Amazon was responsible for 51.2% of the total U.S. digital retail sales last year. That’s roughly 10 times the share of Walmart’s digital retail sales.

However, when COVID-19 began, retailers around the world saw a spike in online shopping and Amazon faced difficulties in its logistics and fulfillment. From March 17 through April 5, 2020, Amazon barred the shipment of non-essential items to their warehouses, choosing to focus their efforts on medical supplies and household goods, like toilet paper and cleaning supplies.  In the early days of the pandemic, shipping times could take up to one month, and Amazon saw an increase in negative reviews, with nearly half mentioning words or phrases related to shipping.

How is Amazon moving forward to meet new demand?

As a company whose reputation is built around their fast delivery times, changes had to be made quickly. In their Q4 2020 Results Earnings Call, Brian Olsavsky, Chief Financial Officer, reported that Amazon added 500,000 new jobs last year and currently employs 1.3 million people. While expanding the employee base to meet new demands in processing orders, packaging, and shipping, they also added buildings in their fulfillment and logistics network to increase their square footage by about 50% year-over-year.

Lesson for other online businesses

While many businesses trained customers to expect less (one example: UPS and FedEx stopped offering service guarantees), Amazon spent $11.5 billion on COVID-related costs, which resulted in 2020 earnings of $125.6 billion, far more than their guidance range of $112 billion to $121 billion. The old adage rings true, you have to spend money to make money. While you may not have $11.5 billion to spend, and you likely don’t need to hire half a million new employees, keep in mind that customer experience is key to earning their trust and future business.

At ShipRx, we want to help you provide the best possible service to your customers at the lowest price. We can help you cut your shipping costs by up to 30%, so you can spend your time and money creating great products for your customers. Get in touch with us today, and let’s discuss how to save money through contract negotiations.

Mike Partner