What happened to Amazon?
What happened to Amazon?
18:18

What happened to Amazon?

Tech Industry
Amazon, so many of the things you used to get in one day, now you're happy to find that they'll arrive someday. The service is straining but nut buckling under the strain of the pandemic. What's really been revealed is how much we didn't know we already relied on it. Now what? [MUSIC] To help me figure out where Amazon is and where they're going, we've got Ben Fox Rubin, senior reporter at CNET News, Lisa Lacy, senior writer from Adweek, and Jose Pagliery, investigative reporter for Univision 41 in New York City. Big picture, let me start with you Ben. What's going on? What is largely causing Amazon to sag right now? This is typically supposed to be the time when retailers are just kind of Retrenching after the holidays. So when you think about that the spike in demand during a typically quiet part of the year has absolutely caught them completely by surprise. Now granted, there are still plenty of supply in the market. It's just a matter of trying to accommodate and trying to catch up to All of a sudden millions of people have been expected to work from home stay at home. So they've just been inundated with new orders. If I recall correctly. Last time, I looked at a bar chart of this Amazon's number one category was consumer electronics. And then a couple of weeks ago or maybe a little bit less, some of your coverage indicated they've largely stopped Warehousing see in their own fulfillment centers to make room for other stuff what a pivot that sounds like. It really is an unprecedented situation for them. So in an effort to try to get millions of people basic goods like baby formula like medical supplies, face masks, things like that. They really had to throw a lot of other elements on the wayside. That doesn't mean that you're not gonna get those shipments, but they're really trying to restrict what they bring into their warehouses. And also they're slowing down those shipments to customers as well. This is in the hopes that the pipes don't get overly clogged and so far, so good. It has been slow, but the wheels haven't fallen off. People are still getting packages. It just has been slower and some of the mix of products has certainly been different than what people have expected to. Yeah, I think part of it underlines what little brats we've become. We expect everything under the sun to arrive in one day and now it may take three or four days and we're aghast, our jaws have dropped. Lisa let me go to you. What do some of the brands out there that sells things through Amazon? What are you hearing about some degree of panic or are they taking it in stride, that yeah maybe our biggest channel isn't a really great channel right now. I think everybody understands that this is a unique moment and so they're not upset, per se. And but it also depends. I feel like so many things with Amazon it's like a case by case basis. So there are some sellers out there that only send products into Amazon warehouses every couple of months. So in those cases, those sellers, they're all right for a while they can rise. Out other sellers, they send stuff into the warehouses more frequently. And so those are the sellers that are sweating a little more. And in some cases, you know, there's so by Amazon, which means as a seller you send your products to Amazon's warehouses, then they take care of it from there they they pack the orders, they ship them whenever a customer orders your product. There's also fulfilled by merchant and so some sellers are no Switching in different fields by merchant and so they hold on to some inventory, and they're fulfilling their own orders just to get them to customers faster. So we have to bear in mind as consumers who maybe didn't even think about this in the past that there are some cases where that big Amazon warehouse that you may have seen in your area is where your stuff comes from. Other times Amazon is just a platform by which you get your stuff from a Reseller or a seller who doesn't run it through an Amazon warehouse? Yes, exactly. So I think customers typically like when you see the smile box on your doorstep, you, you just assume that you ordered it from Amazon. As Jeff Bezos said in his 2018 shareholder letter, which came out about a year ago 58% of physical gross merchandise sales came from those third party sellers. Jose, all of this talk, as we're envisioning all these fulfillment centers and all this vast volume brings us to something you've covered a lot, which is the workforce. Amazon, even if a person didn't know how big Amazon's workforce is, you can tell by the number of people they say they're going to hire. Just that delta tells you how big the workforce is. You've been covering some of the challenges they're having on the ground in the New York area, what have you been finding? So we have to keep in mind during this pandemic, that while all of us are getting either stay at home orders or generally avoiding shopping in person, when we turn and pivot toward shopping online, it's the people who are going to process this who still have to show up to work. We've got an interesting situation here in New York because while Governor Cuomo Cuomo here has ordered all non-essential workers to stay at home. These Amazon employees at these fulfillment centers are still going to work. There's still packaging the stuff they are still moving it, they are still shipping it and going and knocking on doors, ringing door bells Going out in person. And what we see now, is that these workers are getting sick too. And that presents a very unique challenge. Because when you order this package to avoid going out, but you have workers who are getting sick or still showing up to work Coughing are breathing on this package, as they process it as they deliver it. It presents a threat to the customer, but it also presents a threat to the workers. And what we've heard from workers here at least four fulfilment centres in New Jersey in New York, is that they're getting sick. Amazon is telling those who've tested positive for COVID-19 to go ahead and stay home with two weeks pay. But all the workers who are still working who had contact with that person, they don't wanna come in. But they are not being paid to not come in. Now, we know a few instances where somebody was established by an HR in that center to have a direct contact with that person. OK, Amazon is being reasonable and telling that person to stay home with paid work. But all the other workers who were in that room Telling us at Univision here in New York, that the deep cleanings that Amazon is saying they're doing they're not going on. One guy for example, who works in Woodside queens told me that he rubbed his finger along all of the stations and it was still dusty from the day before. So he questioned as to how deep the cleaning it was that they actually did. Another person in Told me on the way into work that he didn't he didn't have any latex gloves. He wasn't given a medical mask, surgical mask and 95. He's processing them there, right so like he's shipping them to customers, but he's not getting them from his employer. He actually showed me the gloves he had they look like construction gloves like the $1 95 cent. Yeah. People. So I gave him my latex gloves because I thought like, Look, I'm not gonna need this extra pair of go use and you're gonna work all day. Now what we've heard isn't just from one fulfillment center. We're hearing this in Edison, New Jersey, Elizabeth, New Jersey, Woodside, New York and Staten Island, New York. Interesting. Ben, let me go to you about the role Amazon finds itself in right now. I mean, the way you described it interesting, it's kind of like they had all of a sudden Prime Day arrived, but they didn't call it Someone else did and they got stuck with it, kind of like giving them a dose of their own medicine. They've launched Prime Day and inflict it on everybody else who has to run and scurry and cover it and do all that. Well. Now it's she was on the other foot, but not the way we wanted to get there. Do you think Amazon's a little panicked about their the responsibility that they've engineered themselves into by being so big? I wouldn't say panicked. I think that that's probably their strongest message that they've really been pushing lately, where they're getting attacked and criticized for. From all sides, they're really significantly under a spotlight from politicians, from advocacy groups and also from their own employees to do more to protect the workforce. While all this is happening, chose Jose described a lot of those issues very well just now. But at the same time, they're saying, look, we're here to provide food for the elderly. We're here to provide Basic needs and basic services to people with pre existing conditions and so many ways. This is how they're trying to present. This is their best PR message. I suppose the bottom line is is that no, they're not a nonprofit. They're a profit making entity. And there's an enormous possibility here that they come out of this crisis, with millions more people even more dependent on them than they had been before. While brick and mortar stores local stores have significantly suffered during the economic crisis, so I'm not trying to sound glib, or anything about it. It's just that They are very well positioned along with some other retailers like Walmart to come out of this crisis even stronger than they had been before. Yeah, that's an interesting point. So Lisa, as you look at this from the point of view of brands and how they evolve in crises, the way Adweek covers a lot, The idea that a company can come out of this stronger is not one that anybody wants to celebrate right now no brands out there blowing their horn saying we're building now and gonna be better because of this guy Be careful with that message. But is this putting Amazon in a good position do you think for future growth I think in terms of online grocery overall but with I mean, Amazon is certainly a big player in that that that is maybe something where we're certainly seeing an uptick in online grocery orders or adoption historically has still been pretty low compared to people who like to go to the store to you know, They got their own produce and their complaints that, online grocery has been too expensive. Right now those things don't matter as much. So more people are trying it. Whether that's the behavior that remains to be seen once people can go to the grocery store again I might think that there's an interesting parallel in China. With the SARS epidemic a number of years ago at Baskin when JD comm was getting off the ground and online shopping didn't have as high penetration as it does now, obviously, but when consumers were stuck at home, they started shopping online and then After that moment in time that consumer behavior changed and jd.com was able and Alibaba as well able to sort of ride that wave. As consumer behavior changed. I think another interesting thing from China, a lot of consumers were live streaming Streaming and brands we are using live streaming to reach consumers. And so whether live streaming now becomes integrated into the shopping experience in China. I think it would be an interesting thing to watch. I think it would be interesting to see Brands in the US start live streaming if Amazon Walmart, if they start tapping into, into that sort of technology to reach consumers in this moment. There's something that this country and frankly the rest of the world is still grappling with, which is the extent of this pandemic. And then you'd mentioned that. You know the effect that Amazon has had on brick and mortar stores in the past? That's a really good point. But this is potentially a learning moment for all of us because Amazon in its own instance is brick and mortar to now right like these are people they show up at a place they work there and a pandemic. Is a different sort of threat than the economic or even like national security threats that we've seen in the past. This is gonna affect all of us everywhere. There's a striking image that these workers have told me about where they're walking off the job and saying I don't wanna get sick. I'm gonna stay home for a few weeks but as they walk out, they see a line out the door for people who are applying for jobs and interviewing for jobs in the way. And so what we've got is a situation where even if the workers who are delivering the stuff walk off and our packages are going to be delayed for a while, they'll be replaced by workers who are going to come in and I assure you, they're going to get sick because the projection now is that more than half of this country will end up getting this virus and we'll put you out for a long time. So We're gonna feel this no matter what, as Amazon consumers, Amazon's gonna feel it as a company. And long term, we're gonna feel it as workers too. And so I don't know what's ahead. Amazon, long term, is gonna probably be stronger, because we'll change our consumer habits. But in the meantime, a lot of their employees are gonna be harmed. But. Possibly us, as well, from ordering these packages and not cleaning them thoroughly on the way in. Any follow-on effects, positive or negative, from Amazon's recent lost battle to set up a major second headquarters in New York? I would say that there's a direct thread between HQ2 and what's happening right now. A lot of the exact same advocacy organizations and workers that have complained about Worker treatment for years that really became extremely vocal during the HQ2 battle in New York. And were ultimately successful in pushing Amazon out of Queens. They are the exact same folks that are organizing workers now, particularly in the New York area. And those also include union organizers. So It's important to actually recognize where a lot of these criticisms are coming from. And I'm certainly curious to find out what their endgame is. Is their endgame to get the warehouses to shut down temporarily during the Corona virus crisis because ultimately that could be very problematic for a lot of consumers millions of consumers or isn't to unionize employees because like I said, a lot of union leaders are speaking on behalf of workers and I mean, you can decide the viewers can decide whether that's a good idea or not. But ultimately the push to potentially unionize these employees. We're talking about hundreds of thousands of folks in the United States that have no union representation right now. At least that's more of a conversation. That's more of a possibility now than perhaps before. All the workers I've spoken to, they want two things generally. One is a temporary shutdown during the pandemic. And I'll get back to that put a pin in that cuz we'll explain the problem with that idea in a second. But the second thing they want at this point is to unionize because they're realizing that without that sort of a cohesive Team, they can't stand up for each other because like I said, you'll have that line out the door people who are essentially gonna be replacing them pretty soon. So going back to that first point about closing it down for deep enough clean and closing it down during the pandemic. If you listen to the president, or the governor of New York or the mayor of New York, this is something that you know, maybe we'll be better off a month or two or three from now. That's not what the scientifics are saying, right? We're gonna see this through the rest of the year, if not more. And so if these workers are successful shutting down the fulfillment center during the height of the pandemic, I have no idea when they're gonna open again. Consumers pay attention to what brands do, not just how they fulfill what I want from them. Well, how much of a difficult moment Do you think Amazon's add here in terms of risk to its brand aside from the potential to its market share growth that we've already talked about? Is this a dicey time for them? I mean it's it's certainly a moment that wall remember, right. But I mean Amazon is after all, the Most customer centric company in the world. I have 150 million Prime members around the world and they have a mass that loyal following based on putting the customer first and and doing everything they can to get you whatever you want within a day or even a couple of hours. And so I mean it Certainly, the reputation from this moment forward depends on what they do. Now, I think that I mean, Amazon is is ingrained in many, many, many people's lives. And so I mean, I think for the Amazon brand itself to take a beating, it would require some pretty extraordinary events here. I mean look, I've got a very negative view about where this pandemic is going here in the US. The way that the government here is handled this crisis have been terrible. And what we potentially are gonna see is that either these strikes are going to put a halt to amazon's activity or slow it down. Or this pandemic will. It's one or the other. So these workers are not wrong in noting that they are at absolute risk by continuing to work I think Jose's view on this is a really interesting one and it's something that I'm trying to grapple with myself as I'm covering the company. I think people's expectations have been moderated obviously. So if their packages arrive a day later or two days later than even the previous week Nobody is gonna be that upset about it. They just want to know that the package is going to arrive. But if it any point the packages stop or riding all together, that would be a huge problem and it would really result in kind of the [UNKNOWN] the kind of A little bit easier status that we've been hanging out in here where a lot of people have been able to operate from home and get stuff delivered to them could significantly change. And the hope would be that that doesn't happen. Now granted, that would have to happen to Amazon, Target, Staples, Walmart You name it, instacart as well. And as we've seen so far, in the past couple of weeks, these companies have been able to navigate what has been an unprecedented situation for them so far, and we'll see how the workers deal with this as well because we're really talking about a lot of people that Have been thrown into the front line for something that they'd never expected to have to do. And I'm talking about US Postal Service people, cashiers, my ups driver. It is really something that I don't think I've ever seen before and probably will never see again. Hopefully not. It's interesting as you guys are all talking the thing I guess the thought that I'm left with as we wrap up here is that Amazon and to a degree, some of the other largest online sellers are such a part of our economy now. We'd always heard that,we could see the numbers and see it, but now we are actually feeling it at the gut level. That I think as we see them hiccup and should they fail in significant ways. It's actually gonna give us more pessimism about the overall situation. They've become a leading indicator in terms of how we're doing, not just this peripheral service we use to deal with what we're going through. I wanna thank you all for being with us today. This has been a really interesting conversation. your expertise has been very disparate and really harmonised. Well I think we really giving our viewers a much better look at what's really going on with Amazon, thank you so much. [SOUND]

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