Coronavirus Hobbled Amazon. Then the Tech Giant Bounced Back.
06 Agosto 2020 - 07:29AM
Dow Jones News
By Sebastian Herrera and Merrill Sherman
Amazon.com Inc. just reported its greatest quarter ever, but
getting there wasn't easy. The coronavirus pandemic brought
enormous challenges to the tech giant early on, tripping it up in a
way rarely seen in its history.
Delivery times and customer reviews slipped, essential items
were unavailable in some areas, and worker absences created
extended challenges. For the first time in years, the company's
share of e-commerce in the U.S. actually fell.
But as the virus raged on, Amazon spent billions of dollars on
its response, hiring workers, increasing pay, improving delivery
times, conducting medical tests for employees and stabilizing its
supply chain. Its share of online sales has already begun to
rebound.
Investors are confident that the consumer habits brought about
by the coronavirus will endure and ultimately make Amazon more
powerful. The e-commerce juggernaut has added more than $700
billion to its market value since its March lows, or about the size
of Facebook Inc. Its market capitalization now exceeds $1.5
trillion, behind only Apple Inc. and Microsoft Corp. among public
companies.
Amazon Delivery Times and Reviews Slip
Many of Amazon's temporary shortcomings during the pandemic came
about because the company wasn't prepared to handle the boost in
demand it saw. While it still led competitors overall in package
delivery times, its famed shipping speeds slipped.
The company had to extend shipping windows by days for essential
products and even longer for nonessential items. Best Buy Co.,
Target Corp. and others sometimes beat Amazon in how fast they got
products to customers.
Amazon's supply problems and delivery speeds caused frustration
among customers and led to a rare surge in negative reviews of the
company.
Amazon Web Traffic Falls
Amazon's troubles led shoppers to visit other e-commerce sites.
As Amazon's web traffic decreased, Walmart Inc., Target and the
online furniture store Wayfair Inc. saw traffic climb.
Amazon's inventory relies on keeping fewer items in stock to
speed up efficiency, making it different from traditional
retailers, which have varying inventory levels at their stores. The
system works well when demand holds steady, but it can be stretched
if there is a rush for which the company is unprepared, which
happened in the first weeks of the pandemic. As it tried to control
its supply chain, Amazon removed certain features, such as online
coupons from its website, to encourage shoppers to buy less.
Pandemic Changes Shopping
E-commerce has seen unprecedented acceleration during the
pandemic. Besides Walmart and Target, smaller companies such as the
grocery delivery firm Instacart have had record growth in sales.
Shopify Inc., an e-commerce platform that sells businesses a
variety of tools to make it easier to operate online stores, has
more than doubled its stock price since the beginning of March.
Investors see Amazon, which accounts for more than a third of
online U.S. sales, as the biggest winner. Amazon made a record
$88.9 billion in sales during its second quarter, and its nonretail
businesses continue to lift earnings for the company.
Logistics Stabilize
Although Amazon's operations were weakened, investor confidence
remains high because of the company's significant investment in
logistics and delivery capabilities. Amazon has built many more
fulfillment and delivery stations than competitors. It also
continues to expand its delivery-vehicle and airline fleets,
creating greater capacity for it to manage more of its own
deliveries.
Amazon Falters, Then Gains
The company's dominant grip on online sales weakened after
demand on its site reached holiday-like levels during the first
weeks of the crisis. Many items on Amazon became unavailable for
weeks, forcing customers to look to other companies.
Walmart, Target and Best Buy, all of which invested
substantially in their online operations in past years, benefited
from Amazon's problems.
Amazon's share of U.S. online shopping, however, has been back
on the rise as its operations have stabilized. The company's profit
in the April-to-June period doubled from a year earlier to $5.2
billion, in part because it shipped more products than it had
expected.
Amazon's Market Value Soars
Big Tech is thriving during the pandemic. And among the world's
biggest tech companies, Amazon's market value has surged since the
beginning of March, rising more than 60%.
--Additional graphics by Kurt Wilberding
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com
(END) Dow Jones Newswires
August 06, 2020 06:14 ET (10:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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