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Amazon and its army of logistics workers are bracing for the first-ever fall Prime Day starting Tuesday, as the extraordinary circumstances of 2020 bring new challenges for a shopping event that has become key for Amazon’s e-commerce business.
The pandemic created unprecedented change and disruption for Amazon. The company has seen its sales surge, and it has rapidly added staff and infrastructure to keep up. Typically, Amazon holds the contrived shopping holiday in July to boost sales during the slow season, but this year, the company pushed Prime Day to the fall when it was struggling to keep up with a deluge of orders from customers sheltering at home.
Prime Day offers sales on hundreds of items for members of Amazon’s Prime subscription service. It began in 2015 and has become a reliable revenue boost for the company.
But the shift to October presents new challenges, coming just weeks before the holiday shopping season, amid the ongoing coronavirus crisis and a period of acute environmental concerns. Meanwhile, the company’s treatment of its third-party sellers is under a microscope following the release of a House subcommittee’s antitrust report last week.
Amazon’s plan to forge ahead with Prime Day despite those complications reveals how essential the six-year-old shopping holiday has become to the company.
An extra long holiday
The decision to hold Prime Day Oct. 13-14 effectively adds an extra month to Amazon’s peak season, the holiday rush that starts with Black Friday in ordinary years. It’s a major effort for Amazon’s logistics and delivery team. Amazon staffs up warehouses with seasonal workers and requires employees to work overtime to keep up with demand.
This spring, Amazon was caught unprepared by a spike in sales, rivaling the holiday season, from customers under shutdown orders scrambling to stock up on essential items and groceries. Without time to prepare for the unseasonal surge, many items abruptly went out of stock, deliveries were delayed, and grocery customers were unable to schedule drop-off times.
Amazon temporarily blocked third-party sellers from shipping non-essential items to the company’s warehouses as it regained its footing and hired an additional 175,000 workers to keep up with demand. In the second quarter of this year, Amazon’s net sales of $88.9 billion surpassed the last holiday season, when it posted $87.4 billion in net sales.
In July, Amazon set new limits on the number of items third-party sellers can stock in the tech giant’s warehouses to prepare for this year’s holiday shopping season. The quantity limits add pressure on sellers to be efficient with inventory, according to James Thomson, a partner at Buy Box Experts, which advises e-commerce retailers. Prior to Buy Box, Thomson was an Amazon executive charged with recruiting and managing third-party sellers.
“If you don’t get Prime Day volumes right, meaning you overestimate what you’re going to sell, you have a stale inventory problem that you better fix quickly,” Thomson said. “People that don’t sell through all the stuff by Prime Day, they may be quickly discounting it in the last two weeks of October so that they can … send in stuff that they otherwise were planning to sell in late November and December.”
Prime Day is almost here! Huge thanks to the hundreds of thousands of folks around the world getting ready for a spectacular Prime Day event and kickoff to the Holiday Season! 🛫📦📦📦📦🚛🚛🚛 pic.twitter.com/6119o1yiFF
— Dave Clark (@davehclark) October 11, 2020
Thomson is skeptical of Amazon’s ability to drive the same sales volumes that summer Prime Days have in years past. He believes Prime Day’s proximity to the holiday shopping season this year will make customers think twice about splurging on items for themselves. But there’s another reason Amazon is so committed to holding the event, Thomson said.
“The hard thing is ramping up your logistics … to build out that capacity both in the warehouses and last-mile,” he said. “Amazon has aggressively built out both of those over the last six months so Prime Day, in my view, is a really good test for Amazon to see how close they are to being ready to support Black Friday and Cyber Monday, which are the days that really matter for Amazon.”
Prime Day’s environmental toll
Amazon has made strides in improving the sustainability of its packaging, investing in recycled and recyclable materials and adding an option for customers who want items to be bundled together more efficiently. The company pledges to make 50% of shipments “net zero carbon” by 2030 through investments in recycled materials, fleet electrification and renewable energy.
But increased sales of items customers may not have otherwise purchased — like an Instapot too heavily discounted to pass up — can drive a significant increase in single-use plastic and packaging. The environmental toll of online shopping also increases with shipping speeds, making it more difficult for delivery routes to be optimized and for items to be bundled together with less packaging.
“Getting there second-day, it’s a massive climate impact,” said Tyson Miller, forest campaign director for the environmental non-profit Stand.Earth. “You can see products are still very over-packaged. I don’t think Amazon.com has figured that out yet and if they did there would be a lot of savings for the planet.”
Environmentalists lament the anti-plastic movement as just one of many casualties of the pandemic. Lawmakers, restaurants, and grocery stores pioneering the shift to reusables changed course this year as fear of transmission on surfaces spread almost as fast as the virus.
Despite evidence that suggests the risk of surface transmission is low, restaurants and bars quickly shifted to disposable dishes, foods once sold loose are now shrink-wrapped, and some grocery stores are banning reusable bags. Brick-and-mortar retail took a nosedive as consumers turned to the internet for just about everything: household goods, groceries, restaurant food, and other items wrapped in disposable packaging.
U.S. demand for flexible packaging is expected to increase by 8% this year, compared to 3% in 2019, according to research firm Wood Mackenzie. Many of the plastics that are experiencing a renaissance during the pandemic are not recyclable. Some lawmakers have lifted restrictions on single-use plastics due to the pandemic and the plastic industry is lobbying for further rollbacks.
Prime Day and the pandemic
In just six months, the coronavirus has transformed consumer shopping habits and tested the ability of companies deemed “essential” to keep their workers safe. Amazon became the subject of intense scrutiny amid anecdotal accounts of outbreaks at warehouses across the country. For months, Amazon declined to disclose the number of coronavirus cases among its workforce, fueling criticism that the company was intentionally opaque about the issue.
Amazon finally disclosed the number this month. More than 19,000 workers have tested positive or been presumed positive for COVID-19, according to Amazon. The company said it conducted an analysis of data on 1.3 million front-line employees from March 1 to Sept. 19 and compared rates to the general population during that time.
The company claims that coronavirus cases among its workers are lower than the general public. If the case count tracked with the broader U.S. population, Amazon would have seen 33,952 cases among the workforce, the company said. Instead, its figure of 19,816 was 42% lower.
But a September exposé from the Center for Investigative Reporting reveals that when it comes to worker safety, there’s often more to the story than what Amazon reports. Reveal, a project of CIP, found “a mounting injury crisis at Amazon warehouses, one that is especially acute at robotic facilities and during Prime week and the holiday peak – and one that Amazon has gone to great lengths to conceal.” Based on internal reports obtained by Reveal, injury rates have gone up each of the past four years, with spikes during the weeks of Prime Day and Cyber Monday.
Amazon warehouses are fully staffed during those weeks to fulfill the flood of orders from customers, a routine with higher stakes this year due to the coronavirus risk.
At another company, the unpredictability and challenges of 2020 might be cause to cancel a major sales holiday, but as Thomson said, “Amazon has never been about taking the easy road.”