Hiring frenzy used to meet extreme demand

Black Friday is about to kick a holiday season like no other into high gear.

The pressure is on for Amazon and other retailers to prove they can navigate above-average online orders linked to the pandemic combined with the rush to holiday shopping. More consumers than ever before are expected to buy their gifts online this year, which could mean products are flying off virtual shelves faster and shipping capacity becomes scarce.

Amazon enters the holiday season in a much stronger position than it did at the start of the year. The first months of the coronavirus pandemic were the biggest test to date on Amazon’s warehouse and delivery capacity. It struggled to keep up with demand, resulting in a rare disruption to its much-vaunted two-day delivery promise.

Since then, Amazon has spent several months stepping up its fulfillment and logistics systems to ensure the holiday season runs smoothly. The company has increased its transport capacity, significantly expanded its warehouses and put more choice in its warehouses closer to customers.

The company has been very busy expanding its warehouse footprint to have more space to store goods. So far this year, the company has opened more than 75 new distribution centers, sorting centers, regional airline hubs and delivery stations in the United States and Canada.

Amazon said it will hire 100,000 seasonal workers to help manage vacation demand this year. It hired 200,000 temporary workers over the holiday season. But the company is already in the process of recruiting from the peak of the coronavirus pandemic, creating 175,000 new jobs in operations between March and April, then 100,000 additional workers in September.

This means Amazon could be one of the few retailers to survive what some are calling “shipageddon,” or the capacity shortage that is expected to hit major shipping carriers this holiday season.

“Amazon is a well-oiled machine,” said Andrea Leigh, vice president of strategy and insight at e-commerce consulting firm Ideoclick and a former Amazon executive. “They won’t be the ones going to fall on this vacation.”

Even so, Amazon can still make some minor changes to help ease the vacation load.

Earlier this week, Amazon highlighted some of its alternative delivery options that allow vacation shoppers to collect their own packages from physical stores and neighborhood “hubs.” The company also highlighted its “Amazon Day” service, which allows buyers to receive all of their Amazon orders in a single day, instead of all week long.

Some have interpreted the move as a way for Amazon to save last mile delivery capacity amid the rush to deliver the holidays, which Amazon has denied. The company said the services are about “giving customers more choice.”

Leigh said she also noticed that Amazon made it more expensive for buyers to return packages through scheduled pickup. Currently, Amazon first suggests that buyers drop off their returns at a Kohl’s, Amazon Locker, or UPS Store, which is free, in the returns window on its site.

An Amazon spokesperson denied that the company is pushing buyers to drop off their packages or increasing the cost of scheduled pickup.

“This is not true,” the spokesperson said. “Amazon offers customers a variety of free, easy and convenient ways to return an item from shipment to delivery – it all depends on what is most convenient for the customer.”

Amazon can also increase the incentives for buyers who choose “rush-free shipping” at checkout or subtly push buyers to use it by making it the default shipping option at checkout, Leigh said. The company has already added a banner to the payment window announcing a digital $ 3 credit if consumers are willing to wait a few extra days for their package to arrive.

The Amazon spokesperson did not respond to specific questions about whether the rush-free shipping option is benefiting its logistics network or whether Amazon Day is reducing shipping costs.

It’s unclear whether consumers will actually choose rush-free delivery at checkout, because even with a digital reward, “it’s a pretty tough sale,” said Juozas Kaziukenas, who runs e-commerce research firm Marketplace. Pulse.

“Amazon can’t just push people towards one-week deliveries because there are already a lot of people complaining about Prime and not receiving things in two days,” Kaziukenas said. “If they did it aggressively, it would only increase.”

If consumers aren’t prepared to wait a few more days, Amazon may offload some of the demand to its third-party sellers – a strategy some merchants say the company has already deployed, according to Bloomberg.

A third-party merchant, who requested to remain anonymous, told CNBC that he has seen an influx of orders for his merchant-filled items. Sellers manage inventory and ship orders for merchant-filled items, rather than using Amazon’s fulfillment services.

An Amazon spokesperson denied diverting orders outside of its fulfillment network.

“Putting together a few anecdotes doesn’t mean that something is globally true,” the spokesperson said. “We have invested heavily in our processing and logistics capacity to provide prompt delivery during the holiday season, and we have not changed the way offers are presented to customers to shift the volume from Amazon delivery to the delivery by the seller. “

Amazon could also build on some of the tools used to measure demand during the pandemic as the final weeks and days of the holiday shopping season approach. Between March and May, Amazon made a series of adjustments to get shoppers to order less, including removing “daily deals” from the home page, as well as stopping coupons and product recommendations.

“It’s not unlikely that we will be able to see a version of it again later in the fourth quarter, because it’s just a very efficient way for them to manage sales on the site,” Kaziukenas said. “It’s almost like a dial that they can turn.”

For Amazon, the real challenge may not materialize until mid-December. That’s when major carriers UPS, FedEx, and the Postal Service will begin enforcing holiday shipping times. After December 15, carriers can no longer guarantee that ground delivery orders will arrive before Christmas Day.

The deadline for shipping could lead to an increase in last-minute gift buyers to Amazon, as it becomes one of the few sites that can ensure on-time delivery within the eleventh hour, thanks to its dedicated delivery army.

“December 16 will be like Black Friday for Amazon,” said James Thomson, consultant for third-party sellers and former director of Amazon Services, in an interview. “It won’t be like anything that has never been seen. Not only because it’s right before Christmas and it’s a big year online and Covid, but because everyone depends on carriers that don’t do not have the capacity to do the job. ”

Amazon still relies on the USPS, UPS, and FedEx to deliver certain packages. But its growing internal logistics network, which includes trucks, planes, delivery vans and contract delivery drivers, has stepped in to cover a growing share of deliveries.

Deliveries through Amazon’s logistics network account for more than 50% of its shipments, both to the United States and globally, Amazon said.

The company’s dedicated delivery fleet will come in handy as in previous holidays, but especially this year, as more consumers are shopping from their couch and not feeling safe running to the store for last-minute gifts. minute.

“Their ability to make a promise and say it’s going to happen by Tuesday, and of course it will happen by Tuesday – they’re going to be able to do it a lot better than anyone,” Thomson said.