Amazon during the pandemic: Superhero or super villain?

Amazon during the pandemic: Superhero or super villain?

We are facing the crisis of the century, the likes of which we have not seen since World War II. Analysts at the World Bank are frightening us with their forecasts. Well, the coronavirus is taking its toll, and the economy, much like people struck by the disease, is struggling with post-viral complications. However, this does not apply to everyone… At a time when others are suffering torments, Amazon is recording record turnover and has crossed the magic valuation threshold of GBP 770 billion, and its owner, Jeff Bezos, earns GBP 1,950 per second!

The latest forecasts prepared by World Bank specialists suggest that the global coronavirus recession (COVID-19) will be the deepest and most severe since World War II. And that is not the end of the bad news, because according to analysts, we will be dealing with the largest number of economies recording a decline in per capita output in over 150 years!

The greatest crisis in human history

The greatest crisis in a hundred years

In the recent history of humanity, the global economy has experienced 14 broad-based recessions, starting from 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020. The most recent market collapse, triggered by the COVID-19 pandemic, appears to be one of the more serious crises humanity has experienced in nearly 70 years.

Ayhan Kose and Naotaka Sugawara of the World Bank warn us about the inevitability and scale of the crisis that will erupt as a result of the global lockdown. The specialists claim that the current recession will be the deepest since 1945–46 and, in its scope, will even put the Great Recession of 2009 to shame. According to the analysts, the corona crisis will become more than twice as large as the recession linked to the collapse of the global economy caused by the implosion of the high-risk mortgage loan market in the USA in 2007–2009.
The coming months will determine how quickly we emerge from the deadly grip of the economic crisis. Much still depends on what the second half of this year will look like. Western economies are successively lifting further restrictions, but the threat of a pandemic resurgence is appearing on the horizon. After no infections were recorded for 56 days, there is now talk of more than 100 people in whom COVID-19 was detected and who had stayed in the Fengtai district of Beijing. This may be a warning signal for society and business. The moment of respite we now have is a perfect time for reconnaissance and investment in digital innovation, as Jeff Bezos knows perfectly well. The founder of Amazon is drawing generously from technological development, thanks to which, in times of crisis, he is achieving record results.
If the pandemic does not return and economies are freed from further restrictions, then according to the optimistic scenario prepared by specialists from Oxford Economics, global GDP will still shrink by around 2.8% in 2020. The conclusion is one: it is certain that we will be hit by the post-corona rebound, the only open question is how hard.

The economic anchor

This condition of the economy is the result of the post-viral complications that business is struggling with. Enterprises, both small ones and large corporations, have encountered an obstacle they had not known before. What until now seemed only a theoretical threat has become everyday reality. Few companies had a ready-made preventive action plan describing how to proceed during a global lockdown.

Who benefits from the pandemic?

Although many enterprises are suffering torments resulting from a dramatic decline in revenue, there are companies that are thriving in the new reality.

– Today business can be divided into three groups. The first is companies that have long used modern IT solutions, are not afraid of transformation and willingly engage in innovative projects. The second group consists of enterprises that have only now noticed such a need and are frantically looking for a way to transform quickly so they can shore up their battered budgets. There is also a third group, technological ignoramuses, who are deaf and blind to the possibilities offered by the internet – lists Sascha Stockem, CEO of Nethansa, which brings Polish and German companies onto Amazon, where, with the help of the AI-equipped Clipperon system, it comprehensively manages their sales.

The first group indicated by Stockem certainly includes the American e-commerce giant. The company founded in 1994 by Jeff Bezos has become one of the most valuable brands in the world. At the time of writing this text, the market capitalization of the e-commerce potentate is nearly GBP 1 trillion. Amazon's owner, Jeff Bezos, also cannot complain about the market conditions. According to the Bloomberg Billionaires Index, he is the only one among the five richest people in the world who did not lose money in 2020. Foreign media estimate that in the last three months alone, the Amazon CEO earned more than GBP 3.8 billion, thanks to which Bloomberg values him at GBP 92 billion net. Is that a lot? That is about 36% more than the British monarchy, whose value is estimated at GBP 68 billion. Perhaps this valuation is influenced by the fact that the head of Amazon earns about GBP 1,950 per second – the equivalent of two months of work in Poland, according to the latest report by Statistics Poland.

As can be seen, the outbreak of COVID-19 did not slow Amazon down. Quite the opposite happened. While other companies were limiting or suspending their operations, the Seattle corporation could not keep up with processing orders. Is this thanks to the titanic work done by the corporation's employees? Not entirely. Fate smiled on Jeff Bezos. His company is strengthening its position as the global e-commerce leader through investments in new technologies and optimization of logistics networks. The circumstances in which the world found itself, hit by the pandemic, exposed the advantages of the world's largest sales platform. It turned out to be the perfect bandage for the wounds that coronavirus inflicted on retail.

– It is a story like from a movie, where superheroes are created by circumstances, not skills. It is similar with Amazon, which admittedly does not lack skills, but the favorable market conditions, a bit of luck and consistency in action produced a synergy effect – says Sascha Stockem.

The bench of reserves

Rising demand and staffing problems

Amazon during the pandemic: who benefits from the crisis?

Things are good, even too good. The scale of commercial success overwhelmed the e-commerce giant, which recently announced that it is forced to carry out a thorough reshuffle in its Whole Foods grocery store chain. There are currently 487 brick-and-mortar stores under this brand in the USA. To reduce the risk of coronavirus infection, management decided to reduce the number of customers who can be inside them at the same time. In addition, temperature checks are carried out daily, and employees do not lack masks and gloves.

– Amazon representatives, in a conversation with The Guardian, boast that since the outbreak of the epidemic, the capacity to place grocery orders has increased by more than 60%. Company authorities promise to do everything in their power to meet market demands. To this end, 100,000 people have been hired, and there are plans to create another 75,000 jobs – reports the CEO of Nethansa.

However, this is still not enough, even though the number of product pickup points located at stores has nearly doubled (from 80 to 150). Dynamically growing demand forced Amazon to make a difficult decision to prioritize online food orders from existing customers and place new users in a so-called waiting room. This caused quite a storm on social media. Backed into a corner, Amazon plans to introduce a new feature that will help customers secure a virtual “place in line.” The distribution of ordered goods will be carried out in the order of requests.

The giant calls for reinforcements

The logistics network under pressure

According to McKinsey analysis, more than a quarter of all jobs in Europe may be affected by the economic effects of the coronavirus pandemic. The consultants estimated that as many as 59 million jobs are at risk from factors such as reduced working hours, temporary work stoppages or permanent job loss, although looking at the statistics, a drastic wave of layoffs has not yet been recorded.
And at the same time, Jeff Bezos, instead of cutting his staff, seems to be shouting: all hands on deck. The recruitment process has started at full speed, but before new employees appear in the warehouses, the American company is trying to encourage its existing staff by raising the hourly rate by USD 2.60. It turns out that this is not enough to convince warehouse workers irritated by the excess of work.

When the epidemic broke out, Amazon's white-collar employees were sent home, while the army of pickers and packers had to face the avalanche of duties that fell on them after the lockdown was introduced. Concerned about their health and terrified by the deluge of work, they prepared a petition to the management board. In April, 1,500 Amazon employees signed a request to optimize the workplace for protections against COVID-19 infection. American state authorities also noticed the scale of the problem. Attorneys general in 14 states and the District of Columbia sent a letter to Jeff Bezos, calling on him to revise the existing procedures. The tension inside the American company is best illustrated by the fact that several workers at the Amazon Staten Island warehouse quit in protest. This happened after one of their colleagues fell ill with coronavirus.

At the same time, when the economy is shrinking and people are trembling for their jobs, the e-commerce giant is breaking revenue records. Paradoxically, the demand for human resources, thanks to which Amazon became a mainstay for consumers during the pandemic, turned out to be a considerable problem for the company. The company's managers faced a huge challenge: how to manage this runaway machine so as to satisfy society's growing needs while also taking care of their own employees.

– This is an important moment in the company's history, which shows how important a role it plays for society. Its extraordinary ability to meet demand in a sense makes it a public utility entity. It is a trading platform bringing together sellers from around the world, whose logistics muscles lifted the burden of the lockdown, delivering life-essential products to millions of people. Amazon employees, like doctors and nurses, deserve to be called heroes – notes Sascha Stockem.

Amazon is perfectly aware that steps such as pay raises or team rotation are only stopgap solutions, which is why the giant announced an increase in investment in additional personnel from an initial value of GBP 270 million to more than GBP 385 million. Thanks to this, it will be able to hire another 75,000 people, which should satisfy the increased demand for processing capacity.

Amazon's problems do not end there. What keeps the company's managers awake at night is the fact that its warehouses could at any moment become a hotspot of COVID-19 infections. To protect itself against such an eventuality, the company installed thermal cameras, which it placed in warehouses around the world, in order to quickly and efficiently screen employees for coronavirus symptoms. The cameras are able to detect fever by comparing a person's body heat with the ambient heat. The technology is faster than the short-range thermometers the company had previously used.

It is no secret that Amazon has its bitter enemies and devoted fans. Not everyone, for example, likes the company's staffing policy. It is worth remembering, however, that Jeff Bezos's trading platform does not fail its customers even under the pressure of the pandemic. – Think about what your life would look like without Amazon? – asked Google CEO Eric Schmidt rhetorically.

– People should be a little more grateful that companies like this obtained capital, made investments and built the tools we now use and which have really helped us – added Schmidt.

Summary

Amazon, valued at more than GBP 770 billion, is one of the few companies benefiting from the COVID-19 pandemic. According to the Bloomberg index, Jeff Bezos is the only one of the five richest people in the world who did not lose his fortune in 2020, and his company increased its grocery order fulfillment capacity by more than 60%. Success comes at a price, however – the giant is struggling with growing pressure on warehouse workers, who are protesting against working conditions, and with the logistical challenge associated with the lockdown. The company has invested more than GBP 385 million in additional personnel and is installing thermal cameras to minimize the risk of infection among employees.