We often think of Amazon as one of those invincible brands. A bulletproof business. But like a lot of tech companies they thrived during the pandemic and now they’re finding life difficult.
1) General volatility. Like all retailers, Amazon is grappling with unprecedented cost inflation at a time when consumer demand remains sluggish. That’s a dangerous combo for any business but in Amazon’s case it’s exacerbated by the fact that during the pandemic they OVER-HIRED (added half a million workers in 2020 alone – not even Walmart, the largest private employer in the US, has ever added so many employees in a given year) and OVER-EXPANDED (essentially doubled their fulfilment network) to help cope with the huge surge in demand for online shopping and cloud computing.
2) Recalibration: return to IRL shopping. We’ve now had a year of relative normality. The world is far more hybrid than we could have ever imagined pre-2020 but the pandemic has taught us the value of stores in this digital era. Shoppers are abandoning e-commerce and returning to bricks & mortar. They’re looking for value over convenience and delaying those discretionary buys. Important to bear in mind here that e-com penetration rates are still higher vs pre-pandemic levels (both US and UK). But the pandemic has reaffirmed that the future of retail is NOT e-commerce – it’s a blended mix of physical and digital commerce.
As a result, Amazon is looking unusually vulnerable.
And, longer term, I believe Amazon will go from disruptor to disrupted. More on that next time.