The breadth of Amazon’s sprawling business interests, and its increasingly central place in America’s fragile supply chain, underscores the company’s hold on consumers — and its potential to solidify its dominance in the coming months. The longer this crisis goes on, the more formidable Amazon will become, according to James Bailey, a management professor at George Washington University’s business school.
“Every crisis creates a void,” said Bailey. “And whatever force fills that void, inherits power.”
Amazon isn’t the only company that could benefit. The crisis appears to be lifting the entire e-commerce industry, according to Bank of America research, which showed the sector grew 16% in March compared to a year ago. Those consumer habits could persist even after the crisis passes, marking a potential tidal wave of change benefiting Amazon’s bottom line for years to come.
But thanks to its existing advantages in scale and efficiency, Amazon stands to emerge from the pandemic stronger than many of its competitors, experts say. In light of the pandemic, Amazon could pull in as much as an additional $4 billion in revenue this year, though added costs of managing the pandemic may cut into Amazon’s profits, said Bank of America in an investor note last week.
But now that it’s been laid bare, the world’s dependence on Amazon may only reinforce questions policymakers were asking before the current crisis about whether the company is too powerful.
The most visible changes in demand for Amazon services have, unsurprisingly, taken place in its core online retail business. The company that built its reputation on ultra-fast deliveries is now experiencing uncharacteristically long wait times to ship many products, including hand sanitizer, toilet paper and digital thermometers.
“It’s getting backed up,” one employee who works at Amazon’s facility in Staten Island, JFK8, told CNN in an interview. “There’s not enough employees to move this stuff.” The worker, who spoke on condition of anonymity for fear of losing his job, said so many of his colleagues have taken paid or unpaid coronavirus leave that the fulfillment center now resembles “a ghost town.”
Amazon didn’t respond to questions about possible worker shortages, but has said in statements that its workers “are heroes fighting for their communities and helping people get critical items they need in this crisis.”
The complaints about Amazon’s safety protections reflect the enormous pressure the company is under to keep delivering packages during the crisis — and how vital the platform has become.
Powering the internet
“You’re seeing surges in things like Slack, Zoom, Fortnite, Netflix — all clients of AWS,” said Justin Post, an industry analyst at Bank of America. “The activity levels for some of their clients are through the roof.”
Like many of Amazon’s subsidiaries, AWS declined to comment for this story. But the range of businesses Amazon owns demonstrates its reach. It has invested tremendously in Whole Foods and a separate grocery delivery service, Amazon Fresh, Post said, both of which are now poised to benefit massively from a population that’s increasingly avoiding brick-and-mortar supermarkets.
“The timing is really interesting,” Post said.
Filling the downtime void
Just as Amazon faces an unprecedented kind of demand for physical goods, it also stands to benefit from a growing appetite for digital services as people seek to stay sane indoors.
Amazon owns Audible, the audiobook marketplace. Last month, Audible made a selection of hundreds of audiobooks accessible for free as part of its response to the pandemic. Since launching Audible Stories on March 19, traffic to the site has spiked. The new offering has received “millions of daily visitors” from around the world, Matthew Thornton, the head of global corporate affairs for Audible, told CNN.
Amazon’s influence will likely exert itself in other ways, too, some more noticeable than others. Having exhausted Netflix’s catalog, Americans may soon gorge themselves on Amazon’s original television series, or buy more e-books for their Kindles. Cooped up inside, those with Amazon smart speakers may now be setting cooking timers more often, or asking their devices to play more music — giving Amazon even more behavioral data and speech samples it can use to hone its services to anticipate our every need.
Playing to Amazon’s strengths
What makes Amazon particularly suited for our current moment isn’t just its ability to serve people’s needs remotely, or its massive customer base. It’s that those things help make Amazon the most well-oiled retail machine on earth, creating positive feedback loops where the more efficient it is, the more attractive it becomes.
Consumers have little time or money to waste; that was certainly true before the pandemic, but is even more so now. That means the crisis may very well cement Amazon’s power further — and at the expense of rivals that are less efficient or can’t outlast the crisis, said Kevin Arquit, an antitrust lawyer at the firm Kasowitz Benson Torres.
“It plays right into Amazon’s strengths,” he said.
Pound for pound, Amazon is better equipped than its competitors to weather the pandemic, Arquit said, because its wealth, scale and supplier relationships translate into the most valuable trait of all in a crisis: resilience. As smaller or less nimble businesses close up shop, in some cases for good, it’s large incumbents like Amazon that will likely win out, he said.
Paul Gallant, an industry analyst at the firm Cowen & Co., said in an investor note Wednesday that the pandemic has temporarily blunted the onslaught of criticism that faced Big Tech just months ago — and that many dominant platforms are now likely “benefiting from new public awareness of how difficult remote life would be without them.”
But, he warned, the federal government’s scrutiny of large, dominant tech platforms continues — on Capitol Hill, at the Justice Department and the Federal Trade Commission. Those investigations may result in reports or even lawsuits that may not be favorable to those businesses, he said.
With Americans relying more on Amazon than ever, it’s a reminder of how pervasive its influence is, and how limited the constraints are on its growth.
“This [pandemic] will move the status quo to even more demand for online shopping, which obviously benefits Amazon, the largest player,” said Arquit.