The large global online ecommerce platforms are already being affected by the severe measures and restrictions imposed to fight the pandemic, and which have already partially spread to European territory (for now on another scale), but that already in the case of China we have seen how it not only affects the consumption capacity of citizens who are quarantined at home, but also blocks production plants, paralyzes supply chains, and cuts off some of the vital flows of world trade, and (do not forget) China is the great global factory.
The really serious issue for Amazon in particular is the high exposure that the company could suffer from the economic side of the COVID-19 crisis, and it is not only because of all the “Made in China” products it sells, but also because of the proximity of emblematic dates in Amazon’s corporate calendar such as “Prime Day”. A campaign with few references and rapidly depleting or even non-existent stocks would not only seriously affect the company’s results, but also its own image in the eyes of its customers and the whole world, even if the ultimate responsibility in this issue is really the fatal virus or Chinese mismanagement of this crisis.
The impact is likely to be far-reaching, both directly and indirectly, since 60% of Amazon’s sales come from third party retailers, whose supply and stock policies may be beyond the control and anticipation of the Seattle giant. Thus, the e-commerce giant has decided to address many of these merchants informing them that they are classified as at risk of supply for having supply chains originating in China, and ask them to clearly explain these risks incurred by both the third party and Amazon itself for having it as a supplier or seller on its online platform. The movement is clear, and it is very likely that Amazon is not only designing some kind of contingency plan for suppliers who do not have the risk of stock-outs properly controlled, but that even Amazon could be considering prioritizing one or another on its platform while the social-sanitary crisis lasts.
Moreover, it is not by luck that Amazon was the first retailer to take action, because in general it is also more vulnerable to stock-outs than other competitors. The disruptive technology deployed by Amazon (and often also developed by them) has allowed the company to reach levels of efficiency that are beyond the reach of many of its competitors, and especially in terms of optimizing the logistics chain and managing stocks and physical storage. Thus, Amazon manages to be profitable where others are not, in part because it can afford to minimize those stocks that represent a significant cost of physical space and storage, especially at the global and massive level of Amazon’s economy of scale. Thus, paradoxically, its capacity for innovation and its disruptive optimization approach, may now be an Achilles’ heel for Amazon, as it faces up to those competitors who have a vitally greater storage capacity in this crisis.
And finally, Amazon is the world’s largest online ecommerce player, and one of the world’s best and advanced companies. It is very likely that other giants (and small ones) of the global ecommerce are already seeing the wolf’s eye, and will have to end up taking measures similar to those Amazon has adopted.