An Amazon.com Inc employee prepares an order in which the buyer requests gift wrapping of an item at a fulfillment center in Shakopee, Minnesota, USA on Nov. 12, 2020.
Amazon.com Inc | Reuters
Black Friday will bring a holiday season into full swing like no other.
Amazon and other retailers are under pressure to prove they can handle above average online orders related to the vacation related shopping spree. More consumers than ever are expected to buy their gifts online this year. This could lead to products flying off virtual shelves faster and shipping capacity running out.
Amazon goes much more into the Christmas season than at the beginning of the year. The first few months of the coronavirus pandemic were the largest test of Amazon’s storage and delivery capacity to date. It struggled to keep up with demand, which resulted in a rare disruption of its vaunted two-day delivery promise.
Since then, Amazon has spent several months improving its fulfillment and logistics systems to ensure a smooth holiday season. The company has increased transportation capacity, staffed its warehouses significantly, and placed more choice in its warehouses closer to customers.
The company was busy expanding its warehouse space to have more space to store goods. So far this year, the company has opened more than 75 new fulfillment centers, sorting centers, regional air transport hubs and delivery stations in the United States and Canada.
Amazon announced it would hire 100,000 seasonal workers to help manage vacation demand this year. 200,000 temporary workers were hired during the holiday season last year. However, since the height of the coronavirus pandemic, the company has been on a hiring frenzy. 175,000 new jobs were created between March and April and another 100,000 in September.
This means Amazon could be one of the few retailers outliving what some refer to as “Shipageddon,” or the capacity constraint that is expected to hit major shipping lines this Christmas season.
“Amazon is a well-oiled machine,” said Andrea Leigh, vice president of strategy and insights at ecommerce consultancy Ideoclick and a former executive at Amazon. “They won’t be the ones to fall on this vacation.”
Even so, Amazon can still make a few minor changes to reduce the vacation burden.
Earlier this week, Amazon unveiled some of its alternative delivery options, which vacation shoppers can use to get their own packages from brick and mortar retail stores and “hubs” in the neighborhood. The company also referred to its “Amazon Day” service, which allows customers to receive all of their Amazon orders in a single day instead of the whole week.
Some interpreted the move as an opportunity for Amazon to save delivery capacity on the last mile in the rush to deliver on public holidays that Amazon has denied. The company said services are about “giving customers more choice”.
Leigh said she also noticed that Amazon has made it more expensive for buyers to return packages via scheduled pickup. Currently, Amazon is initially suggesting that buyers submit their returns to a Kohl’s, Amazon Locker, or UPS store, which is free, in the returns window on their website.
An Amazon spokesperson denied that the company is pushing buyers to drop off their packages or increase the cost of the scheduled pickup.
“That’s not true,” said the spokesman. “Amazon offers customers a variety of free, easy, and convenient ways to return an item from shipping it back to returning it – it’s all about what’s most convenient for the customer.”
Amazon can also increase incentives for shoppers who choose “no rush shipping” at checkout or subtly push shoppers to use it by making it the default shipping option at checkout, Leigh said. The company has already added a banner to the checkout window promoting $ 3 digital credit if consumers are willing to wait an extra few days for their package to arrive.
At the top of the Amazon checkout window, you’ll see a banner that says “No-Rush Shipping”
The Amazon spokesman didn’t answer specific questions about whether the no-hurry shipping option would benefit his logistics network or whether Amazon Day would reduce shipping costs.
It’s unclear whether consumers will actually choose a no-rush shipping at checkout, since “it’s a pretty heavy sale,” even with a digital reward, said Juozas Kaziukenas, who heads e-commerce research firm Marketplace Pulse.
“Amazon can’t just push people into weeklong shipments because there are already a lot of people complaining about Prime and getting nothing in two days,” said Kaziukenas. “If they did it aggressively, it would only increase.”
If consumers aren’t willing to wait an extra few days, Amazon can outsource some of the demand to its third-party suppliers – a strategy that some retailers say the company has already implemented Bloomberg.
A third party vendor wishing to remain anonymous told CNBC that it had seen an influx of orders for its merchant-filled items. Sellers manage inventory and ship orders for merchant-fulfilled items instead of using Amazon’s fulfillment services.
An Amazon spokesperson denied redirecting orders outside of its fulfillment network.
“Stringing up a few anecdotes does not mean that anything is broadly true,” said the spokesman. “We have invested heavily in our fulfillment and logistics capabilities to ensure fast delivery this holiday season, and have not changed the way customers are presented with offers to shift volume from Amazon fulfillment to seller fulfillment.”
Amazon could also rely on some of the tools used to measure demand during the pandemic in the final weeks and days of the holiday shopping season. Between March and May, Amazon made a number of improvements to encourage customers to order less. This includes removing “Daily Deals” from the homepage, as well as stopping coupons and product recommendations.
“It is not unlikely that we will see a version of this again later in the fourth quarter as it is just a very effective way for them to manage sales on the website,” said Kaziukenas. “It’s almost like a dial that you can turn.”
Real challenges can come later
For Amazon, the real challenge may not come until mid-December. That’s when big carriers UPS, FedEx and the Postal Service will begin enforcement Shipping deadlines for holidays. After December 15th, carriers can no longer guarantee that orders for ground delivery will arrive before Christmas.
The shipping disruption could bring a flurry of last-minute gift shoppers to Amazon as it becomes one of the few sites that can ensure on-time delivery by the eleventh hour thanks to its dedicated delivery army.
“December 16 will be like a Black Friday for Amazon,” said James Thomson, third party advisor and former head of Amazon Services, in an interview. “It’s going to be unlike anything ever seen. Not just because it’s just before Christmas and it’s a big year online and Covid, but because everyone else is dependent on carriers who are unable to do that Work to be done. ”
Amazon still relies on USPS, UPS, and FedEx to deliver some packages. However, the growing internal logistics network spanning trucks, planes, vans and contract delivery drivers has covered a growing proportion of shipments.
According to Amazon, shipments through Amazon’s logistics network account for more than 50% of shipments in the US and worldwide.
The company’s dedicated delivery fleet will come in handy as it did in the previous holidays, but especially this year as more consumers shop from their couches and don’t feel safe looking for last minute gifts.
“Your ability to make a promise and say it will come by Tuesday, and sure enough to have it by Tuesday – they will do a lot better than anyone,” said Thomson.