Best DevOps

6 Ways Amazon’s Hand Is Getting Stronger During the Coronavirus Crisis

Source:-hestreet.com

As consumers and businesses alike lean on Amazon during the COVID-19 pandemic, its long-term positioning has never looked better.

When the worst of the COVID-19 pandemic has passed and some semblance of normalcy has returned to American economic and social life, Amazon.com (AMZN) – Get Report will almost certainly be in a stronger position than it was when the crisis started.

Here are six ways in which Jeff Bezos’ firm looks poised to strengthen its hand during this very extraordinary time.

1. A Greater Reliance on E-Commerce

With many bricks-and-mortar retailers in the U.S. and Europe forced to shutter their operations, and with many consumers reluctant to leave their homes regardless, Amazon has become an even more vital utility in the lives of many of its customers.

Much of this spending shift towards e-commerce will likely prove to be temporary, as consumers return to visiting their local retailers once they’re free to do so. But given the convenience benefits of online ordering in general, and Amazon Prime in particular, it’s quite possible that some of this change in shopping habits will stick.

2. An Inflection Point for Online Grocery Sales

During a time of massive grocery-buying (and in some cases, over-buying) among consumers who are spending most of their time at home, Amazon’s Whole Foods and Amazon Fresh grocery delivery services have been seeing massive order volumes. In the metro areas where they’re available, the services provide Prime members with free delivery (not counting a tip) within a selected 2-hour window on $35-plus orders.

In addition, Amazon was forced on Thursday to temporarily suspend its Prime Pantry service, which provides free shipping on $35-plus grocery orders from Amazon warehouses, due to high demand.

There’s a good chance that many of those who have been placing grocery delivery (or for that matter, grocery pickup) orders for the first time during recent weeks will continue using them over the long run.

3. More Fulfillment and Delivery Scale

On Tuesday, Amazon announced that it’s hiring 100,000 warehouse and delivery workers to deal with the demand spike that it’s currently witnessing, and also hiking wages for warehouse/delivery workers by $2 per hour through April. The actions come after a 2019 during which Amazon’s headcount rose by 23% to 798,000, thanks in part to its efforts to make 1-day shipping the norm for Prime members in the U.S. and elsewhere.

With Amazon possessing $32 billion in net cash (cash minus debt) at the end of 2019, and also having a stellar credit rating and plenty of long-term earnings power, the company should have little trouble affording its hiring spree and wage hikes. And ultimately, the hiring will give Amazon’s warehouse and delivery operations even more of a scale advantage relative to rivals.

4. A Spike in Video Streaming Activity

Streaming services have naturally seen usage spikes in recent weeks. In Europe, popular streaming services have had to throttle their bitrates to lower the strain placed on the continent’s telecom networks.

It’s safe to assume that Amazon’s Prime Video service, which from all indications is an important customer acquisition and retention vehicle for Amazon Prime, has seen a usage spike lately. Likewise, one has to assume that the amount of time spent using devices running Amazon’s Fire TV platform has gone up.

5. A Greater Reliance on Public Cloud Services

When it comes to inking large new deals and doing deal implementations that require hands-on work with customers, Amazon Web Services (AWS) and its public cloud rivals are likely having a hard time right now, given that salespeople and IT pros are often unable to meet with potential and existing clients in person.

But on the other hand, as TheStreet’s Tiernan Ray observed, many businesses seeing heavy cash burn are going to be unlikely to sign off on major new purchases of on-premise IT systems and software. Pay-as-you-go public cloud services are bound to look more appealing to many of them. And as a result, the long-term trend towards greater public cloud usage relative to on-premise IT investments might accelerate a bit.

6. An Improved Public Image

It wasn’t too long ago that Amazon was receiving a fair amount of negative publicity related to things like the FTC’s antitrust investigation of the company and conditions at some of its fulfillment centers. With Amazon both acting as a vital utility during this crisis and using the occasion to step up its hiring and temporarily hike wages, its standing in the court of public opinion is likely getting a boost right now.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.