Hiring spree used to meet extreme demand

A worker at Amazon.com Inc. prepares an order in which the buyer asked for an item to be wrapped in a fulfillment center in Shakopy, Minnesota, US, on November 12, 2020.

Amazon.com Inc | Reuters

Black Friday is set to kick off the holiday season with none other.

There is pressure on Amazon and other retailers to prove that they can navigate above the epidemic-bound average online orders combined with the holiday shopping rush. Over this year, consumers are expected to buy their gift online, which could mean that products fly faster to virtual shelves and have lower shipping capacity.

Amazon is entering a very strong position in the holiday season, as it closed at the beginning of the year. The earliest months of the coronovirus epidemic are Amazon’s largest test yet on warehouse and distribution capacity. It struggled to keep up with demand, resulting in a rare disruption to its two-day delivery promise.

Since then, Amazon has spent several months revamping its completeness and logistics system to ensure that it is a smooth holiday season. The company has increased transportation capacity, developed its warehouses sufficiently and selected more of its warehouses closer to customers.

The company is busy expanding its warehouse footprint to have more space to hold goods. So far this year, the company has opened more than 75 new fulfillment, sort centers, regional air hubs and delivery stations in the US and Canada.

Amazon said it would hire 100,000 seasonal employees to help manage holiday demand this year. It hired 200,000 temporary employees during last year’s holiday season. But the company has already been hiring since the height of the coronovirus epidemic, bringing 175,000 new operations jobs between March and April, then an additional 100,000 employees in September.

This means that Amazon may be one of the few retailers that some are calling “Shippeddon”, or lack of capacity expected to hit major shipping carriers this holiday season.

“Amazon is a well-oiled machine,” said Andrea Leh, vice president of strategy and insights at e-commerce consulting firm Ideclic and a former Amazon executive. “Those are not going to be the ones who are going to make this holiday short.”

Nevertheless, Amazon can still make some minor changes to help lighten the holiday burden.

Earlier this week, Amazon highlighted some of its alternative delivery options, which allow holiday shoppers to get their own packages from brick-and-mortar retail locations and neighborhoods. The company also pointed to its “Amazon Day” service, which allows shoppers to receive all of their Amazon orders on a single day, instead of week.

Some interpreted it as a way for Amazon to save some last-mile delivery capacity amid holiday delivery congestion, which Amazon rejected. The company said the services are “about providing more options for customers.”

Leah said he has also noticed that Amazon has made it more expensive for shoppers to make package returns through a pickup. Currently, Amazon first suggests that shoppers leave their returns on their site at a kohl, an Amazon locker, or a UPS store, which is free.

An Amazon spokesperson denied that the company was pushing shoppers to abandon their packages or increase the cost of scheduled pickups.

“That’s not true,” the spokesman said. “Amazon provides customers with a variety of free, easy, convenient ways to send an item back and down – all of which are most convenient for the customer.”

Amazon could also increase incentives for shoppers, who choose “no-rush shipping” at checkout, or push shoppers outright to use it by making it the default shipping option at checkout, Leah said. If consumers are willing to wait a few extra days for their package to arrive, the company has already added a $ 3 digital credit banner to the advertisement in the checkout window.

A banner ad “No-Rush Shipping” is shown at the top of Amazon’s checkout window

Amazon spokespersons did not answer specific questions about whether the no-rush shipping option benefits its logistics network or if Amazon Day reduces shipping costs.

“It’s unclear whether consumers will actually choose shipping during checkout, with no digital reward, without congestion,” said Juozas Kaziukenas, who runs e-commerce research firm Marketplace Pulse.

“Amazon can’t just push people into weekling delivery because there are already a lot of people who complain about Prime and are not getting things in two days,” Kaziacanas said. “If they did it aggressively, it would only increase.”

According to Bloomberg, if consumers are not ready to wait for a few extra days, Amazon may offload some demand to its third-party sellers – a strategy some merchants say the company is already deploying.

A third-party businessman, who asked to remain anonymous, told CNBC that he had seen a flood of orders on his merchant-finished items. Sellers manage and place inventory on merchant-finished goods rather than using Amazon’s fulfillment services.

An Amazon spokesperson denied that it was reversing orders outside its fulfillment network.

“Doing some anecdotes together does not mean that something is largely true,” the spokesperson said. “We’ve invested heavily in our fulfillment and logistics capacity to provide fast delivery this holiday season, and that hasn’t changed how customers move from Amazon fulfillment to seller fulfillment to volume goes.”

Amazon can also rely on some means that used meter demand during the epidemic as it happens in the last week and holiday shopping days. Between March and May, Amazon created a series of twists for shoppers to order less, including removing “daily deals” from the homepage, as well as withholding coupons and product recommendations.

“It’s unlikely that we might see some version later in Q4, as this is just a very effective way for them to manage sales on the site,” Kaziukanus said. “It’s almost like a dial they can replace.”

Real challenges may come later

For Amazon, the true challenge may not come until mid-December. That is when major carriers UPS, FedEx and Postal Service will start implementing holiday shipping deadlines. After December 15, carriers can no longer guarantee that ground-delivery orders will arrive before Christmas day.

The shipping cutoff can give Amazon a large share of last-minute gift buyers because it is one of the few sites that can ensure timely delivery at the eleventh hour, thanks to its dedicated delivery army.

“Dec 16 is going to be like Black Friday for Amazon,” said James Thompson, a third-party vendor and former head of Amazon Services, in an interview. “This is going to be the opposite of what can be seen. Not just because it’s right before Christmas and it’s a big online year and covet, but because everyone is dependent on carriers that don’t have the ability to get the job done is.”

Amazon still relies on USPS, UPS and FedEx to deliver some packages. But its growing in-house logistics network, which extends to trucks, planes, delivery vans and contracted delivery drivers, has stepped in to cover a growing share of deliveries.

Amazon said that more than 50% of shipments from both the US and globally are delivered via Amazon’s logistics network.

The company’s dedicated delivery fleet will come in handy as before, but this year, especially this year, as many more consumers shop from their couch and don’t feel safe to rush to the store for last-minute gifts.

“Their ability to make and say a promise will come by Tuesday, and sure enough by Tuesday – they will be able to do that,” Thomson said.

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