Amazon: COVID-19 Winner
Amazon is an undeniable internet giant that once began by selling books online, and has branched into innumerable categories, selling almost anything and everything one might need or want. A company’s success that surpassed comprehension, and more so in the pandemic has in return received intense criticism. Amazon’s innovation vision has brought it a long way to what it is now, known to be the world’s largest online retailer. Also, it’s one of the most powerful companies in the world that has great economic power, given its capacity to disrupt consumers’ shopping behavior. The article “The Amazon Effect on the U.S. Economy” (Krishna, 2021) demonstrates the magnanimity of Amazon’s presence in the market and how it manages to create “Economic Ripple Effects”.
Mrinlani Krishna (2021) begins by mentioning Amazon’s strongest and most sustainable competitive advantage: no storefronts. Aside from the lower profit margin attained by reducing the company’s overhead costs, it seemed like their business model was designed to capitalize on a global crisis like COVID-19. In a year where the vast majority of small businesses have greatly suffered from the pandemic, Big Tech companies like Amazon grew in vitality and have turned into default retailers for customers. Amazon’s surge in profits is particularly owed to the global online shopping shift. Lockdown forced people to discover alternatives to brick-and-mortar stores, resorting to the famous e-commerce giant known for its convenience, competitive pricing and endless product portfolio.
The article goes onto claiming that Amazon contains a deflationary force on the economy, by slashing prices, mitigating supply chain costs, and setting a par of continuously innovative business model integrations, making it incredibly difficult for businesses to keep up, resulting in endless price wars. While it is a call for concern that wage increases may become hindered as a consequence of such a heavy impact, Amazon has been working to become employee centric. In a recent letter sent out by the CEO Jeff Bezos to shareholders, the company raised its minimum wage to $15 an hour, according to Bloomberg (2021). This could be the spark of a new trend for Amazon to lead, by pressuring competitors to implement better pay.
Accompanying the start of the pandemic was a flood of orders that forced great pressure on Amazon’s workforce. The company faced a dilemma of attempting to balance between a 400K worth of an increased workforce as well as an acceptable level of protection against COVID-19. Although Amazon played part in improving employment, it has also faced numerous lawsuits (The French Sud Commence Trade Union, New York Attorney General Letitia James), employee strikes, and negative PR. According to The Guardian (2020), the company is not doing enough to protect is workforce, by allegedly violating laws like not enforcing masks as mandatory up until April, and not operating the air conditioner in the heat. Anna adds, “Employees worked overtime, and new recruits arrived in masse, going against the COVID-19 protocol for social distancing”.
Although Amazon’s success made it immensely difficult for small businesses to compete, it has also opened a gateway for entrepreneurs to enter Amazon’s massive network and sell globally by providing eligible companies with digital storefronts and access to Prime Day deals. According to Krishna (2021), “900,000 jobs were created outside of the company due to the Amazon Marketplace”.
COVID-19 has and continues to radically re-engineer our world, one of which is Amazon’s domination of the global retail market. In this summary, we have seen Amazon’s “Economic Ripple Effect” and how this intends on growing stronger. Regardless of the controversies surrounding the tech giant, its platform is irresistible.