The coronavirus has battered and beleaguered numerous industries over the last month, leaving few survivors in its wake. Despite the carnage, one organization is uniquely poised to stand up and fight back. Even those that loath big business must respect the reality that it takes a titan to fight a threat as prevalent as COVID-19. That titan is Amazon.
Amidst growing unemployment claims, Amazon is one of the few organizations able to expand its workforce and increase pay. CEO Jeff Bezos even released an employee letter highlighting the critical role Amazon is playing (and will play) in shaping the national response to the pandemic.
Amazon’s position to support the battle didn’t come about by chance. Instead, it was the result of years of infrastructure and service rollouts that catered to the convenience needs of its customers – a convenience that has now become a necessity.
So here is a look at five reasons why Amazon is primed to deliver critical supplies (and record profits) in uncertain times…
The key to convenience is distribution, and Amazon has created the most elaborate, and vertically integrated, physical distribution network the world has ever seen. Amazon has invested billions in planes, trucks, and van fleets to create an end-to-end system that supports its same day, next day, and two-day shipping options. Where Amazon doesn’t own the entire supply chain, the organization’s massive scale and volume give it price negotiating leverage with third-party delivery partners.
As impressive as Amazon’s physical distribution system is, it’s digital distribution network is even more impressive. Like the physical network, Amazon has a fully integrated digital distribution network, owning not only the creation of the content but also hosting and delivery (to both physical FireTV devices and apps on nearly any device).
At the heart of this distribution network is Jeff Bezos’s “Virtuous Cycle” (i.e. a momentum building ‘flywheel’) that continues to drive prices down and customer experience up as new partners get added to its sales and distribution networks.
Speaking of the flywheel and partners, it’s Amazon’s Marketplace that unlocks the real value to the end customer. Back in 2017, the scales tipped and Amazon began selling more items from third parties (i.e. marketplace items) than those sold directly by Amazon. What looks like a single integrated Amazon.com site is really just a front door to accessing a marketplace of millions of products from over 8 million sellers. And not only does Amazon provide eCommerce capabilities to these partners, but many of its sellers also take advantage of Amazon’s distribution network through its Fulfillment by Amazon (FBA) service.
The key takeaway is that Amazon can support its home-ridden customers during their battle with the coronavirus because they’re not fighting the battle alone. Instead, each purchase is backed by millions of sellers and a robust ecosystem stocked with wares from those sellers.
Amazon Web Services (AWS)
If Amazon Marketplace and Fulfillment by Amazon (FBA) is the engine that keeps the flywheel stocked with physical goods, it’s Amazon’s Web Services (AWS) that provide the momentum behind the organization’s digital distribution. Not only does AWS power Amazon’s infrastructure, but it’s also used to support well over 1 million enterprise customers.
The AWS infrastructure powers not only the growing sales Amazon has seen as a result of the coronavirus, but also the hours of streaming media people will be watching as they quarantine themselves from the world.
That Netflix show you’re probably watching as you read this? More than likely, it’s being powered by the AWS infrastructure. While Netflix may not make additional revenue off existing subscribers who will undoubtedly be watching more streaming media, you can bet Amazon will. After all, Netflix is AWS’s biggest customer and they pay Amazon based on usage.
While Amazon Prime may be the face of Amazon, it’s really built on the back of Amazon’s Distribution Network, Web Services (AWS), and Marketplace. While Prime itself may not be profitable, it’s the gateway drug of convenience and opens up customers to other Amazon services (video, photo storage, music, etc.) that can be monetized in many ways.
While Prime is impressive during the best of times, its prowess has been on full display during the coronavirus pandemic. The speed and convenience of Prime are nearly impossible for anyone (except maybe Walmart) to emulate. Even if your single day delivery gets delayed, having everything you ever needed at your doorstep within two days should make us step back and appreciate our first world problems.
Digital entertainment is incredibly important when half of the world’s population is forced into isolation for weeks. Thankfully there’s plenty of streaming options available. While Amazon Video might not be the first choice for most (thanks to Netflix, YouTube, and Disney+) it shouldn’t be overlooked. Amazon has something Netflix doesn’t, the ability to generate additional revenue through incremental purchase options. Yes, Amazon Video has ‘a la carte’ options for both Prime and non-Prime subscribers, which means additional profit that Amazon can reinvest into its video services and all of the aforementioned distribution infrastructure.
The flywheel keeps spinning…
Amazon has flexed its muscles for years, but it’s strongest growth may actually occur during a time when most other organizations are struggling to keep their doors open. It’ll be interesting to see whether Amazon can sustain its pace once the pandemic’s worst days are behind it.
Regardless, one thing is for sure: Amazon will play a huge role in getting us through this as a nation. Let’s just hope the Federal Government, State Governments, and other organizations have the ingenuity Amazon does because they can’t fight COVID-19 alone.