In the middle of March, as Americans faced down a terrifying pandemic caused by a novel and poorly understood virus, only one choice felt certain, or at least safe. It was time for America’s all-purpose disaster response; it was time to stock up. But this time-honored routine was newly challenging. The broad, sterile, fluorescent aisles of supermarkets and big-box retailers suddenly felt more like viral gantlets. In some cities, lines stretched out the doors, suggesting chaos and barren shelves inside. In many states, whole categories of brickand-mortar retail were shut down, either voluntarily or by edict. It was, at perhaps more than any moment in its history, Amazon’s time to shine.
At the online retailer, however, things were not going well. For many shoppers, it was the first place to turn, but demand for certain items was overwhelming the company’s ability to fulfill orders, not just for panic buyers but in general. By March 17, Amazon had suspended shipments to its warehouses of items that were not in ‘‘high demand,’’ scrambling, and often failing, to keep up with orders for soap, sanitizers and face masks, as well as a wide range of household staples, including food. By then, customers looking for these items were, for the first time, experiencing an Amazon that was conspicuously broken. Empty shelves in a supermarket are self-explanatory. But on Amazon, customers were confronted with failures that were much weirder and harder to understand, with, of course, nobody around to explain them.
Searches for antibacterial soap and hand sanitizer turned up page after page of irrelevant products, scams and overpriced items with shipping times weeks or months in the future. (By the end of March, the company said it had removed over 3,900 seller accounts and half a million products in the U.S. for price-gouging alone.) As time went on, widening shortages told the story of customers’ evolving attitudes, lifestyles and needs in the time of Covid-19: webcams, exercise equipment, video-game consoles, diapers, bleach. (By April, hair clippers.) In categories under high demand, well-known brands appeared to be sold out, as were direct competitors, also-rans and half-related items. By May, some customers searching for hand sanitizer were still being presented, on the first page of search results, with Kindle e-books about how to mix it at home.
Here, in a time of crisis, Amazon’s vaunted e-commerce machinery was failing, and at the very tasks for which its millions of customers flocked to it. All of a sudden, the Everything Store wasn’t even as well stocked as, say, an urban corner store, or a gas station, or a smaller online retailer. To customers trying to place orders, it didn’t just seem overwhelmed — the site seemed broken, more like a sprawling, malfunctioning machine than a retailer under unusual stress. More than just failing them, it seemed to be exposing them to scams and exploitation, a peculiar sort of store that seemed to have lost control of its own shelves. There were signs of distress in Amazon’s vast network of fulfillment centers, too. Employees were falling ill. Some workers were staying home out of fear for their own health; others staged walkouts.
In so many ways, this was the future Amazon had been planning for: Brick-and-mortar stores were closed, consumers were eager to order all manner of things online and the brand was all but synonymous, already, with e-commerce. And yet in a statement released with Amazon’s first-quarter earnings, the company’s chief executive, Jeff Bezos, braced investors for a rocky period. ‘‘If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,’’ he said. About $4 billion in expected operating profit for the next quarter — ‘‘and perhaps a bit more’’ — would instead be absorbed into Covid-related expenses. The company had experienced a surge in demand, but quarterly operating income had fallen by 43 percent in North America year over year. Internationally, it had lost money. In the statement, Bezos praised his company’s ‘‘adaptability and durability’’ but said the Covid crisis had been ‘‘the hardest time we’ve ever faced.’’
In April, however, Amazon announced that it had hired 175,000 workers in its fulfillment-anddelivery network — a sign of supreme confidence. Wall Street, too, has proved to be more confident in the company than ever; after a brief dip at the height of Amazon’s Covid-related troubles, the company’s stock price is hovering near a record high, assuring Bezos’s status as the richest person in the world by a large margin. Indeed, few doubt that Amazon will overcome this ‘‘hardest time.’’ To customers and investors alike, the company has long been the alternative to modes of shopping that may now be in accelerated and terminal decline. But for a few weeks, Amazon — the borderline-magic website that makes things appear on your doorstep — showed us what it was really made of, revealing something more complicated and delicate than its seamless surface usually lets on: machinery half-built and already straining under its own success, supported by an army of invisible middlemen and kept running by hundreds of thousands of workers.
As of its most recent disclosure, Amazon employed 840,400 workers around the world. More than 150 million people subscribed to Prime, paying an annual fee in exchange for, among other things, access to free, fast shipping. In recent years, Amazon has been scaling up aggressively in virtually every dimension that matters: Each year, its systems are bolstered to handle more people, more demand, more volume, more stress. Since 2014, its revenue has tripled.
Entering 2020, well into its third decade of ruthless expansion, Amazon was operating with a powerful tailwind. More Americans were doing more shopping online; its biggest online competitors were still hopelessly behind; the collapse of American brick-and-mortar retail — Amazon’s true competition — was accelerating, and its acquisition of Whole Foods had successfully given the company a way into another industry on which it had ambitious designs. For regular customers, ordering from Amazon is less an experience than a routine — a repetitive, second-nature interaction with a machine that brings you things; a faint but recognizable consumer version of the processes that repeat, ever faster, in Amazon’s warehouses.
It benefits Amazon to be understood as an online store because it leads to underestimation. Amazon competes with Walmart, but Walmart isn’t its competition — at least not in the way that Target was to Walmart, or Walmart was to Kmart. Rather than a retail operation with a website, Amazon is better understood as a set of far more ambitious commerce-related systems overseen by a single company. This arrangement might be easiest to see in Amazon Web Services. Through A.W.S., Amazon rents hosting and computing infrastructure to companies big and small. Instead of buying, operating and updating their own data centers, clients including Netflix, Apple and the United States government rent space and computing power from Amazon. Where possible, Amazon engages with this infrastructure as something like a customer. Netflix runs on A.W.S. — but so does Amazon’s Netflix competitor, Prime Video.
Beneath the surface, Amazon’s retail operation works in much the same way. It is not a unified retail company through which Amazon sells products it has sourced or manufactured itself. It’s a platform connecting millions of customers with millions of sellers — none, of course, as large as Amazon itself. In exchange for a fee, Amazon lets a wide variety of parties sell goods through Amazon, right alongside those sold by Amazon. In exchange for more fees, Amazon will let you advertise those items against others, and its own. In accordance with another fee structure, Amazon will receive your products into its warehouses, process your orders and ship them to customers with the urgency associated with Amazon Prime, with which your listings will be badged. More than half of the products sold through Amazon are sold by third parties, many of which are effectively leasing floor space and logistics capacity — not computer servers but an actual work force — from the company. For brands and manufacturers, not entirely unlike regular users, Amazon is a thing you sign up for and give money to and then live inside, and with, for better or for worse.
Amazon’s systems are designed to scale up without clear limits. ‘‘On the internet, companies are scale businesses, characterized by high fixed costs and relatively low variable costs,’’ Bezos told Businessweek in 2001. ‘‘You can be two sizes: You can be big, or you can be small.’’ Amazon, two decades later, is a collection of systems that are either already big or that Bezos believes might one day become big: its stores, including Amazon, Zappos and Whole Foods; Amazon Web Services; its media platforms, Prime Video and Music, the Kindle store and Audible; its newer acquisitions and platforms, like the streaming site Twitch, or Ring, the home-security-camera company. Most Amazon investments are engineered for the possibility, at least, of category supremacy. Some have already achieved it.
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At the online retailer, however, things were not going well. For many shoppers, it was the first place to turn, but demand for certain items was overwhelming the company’s ability to fulfill orders, not just for panic buyers but in general. By March 17, Amazon had suspended shipments to its warehouses of items that were not in ‘‘high demand,’’ scrambling, and often failing, to keep up with orders for soap, sanitizers and face masks, as well as a wide range of household staples, including food. By then, customers looking for these items were, for the first time, experiencing an Amazon that was conspicuously broken. Empty shelves in a supermarket are self-explanatory. But on Amazon, customers were confronted with failures that were much weirder and harder to understand, with, of course, nobody around to explain them.
Searches for antibacterial soap and hand sanitizer turned up page after page of irrelevant products, scams and overpriced items with shipping times weeks or months in the future. (By the end of March, the company said it had removed over 3,900 seller accounts and half a million products in the U.S. for price-gouging alone.) As time went on, widening shortages told the story of customers’ evolving attitudes, lifestyles and needs in the time of Covid-19: webcams, exercise equipment, video-game consoles, diapers, bleach. (By April, hair clippers.) In categories under high demand, well-known brands appeared to be sold out, as were direct competitors, also-rans and half-related items. By May, some customers searching for hand sanitizer were still being presented, on the first page of search results, with Kindle e-books about how to mix it at home.Here, in a time of crisis, Amazon’s vaunted e-commerce machinery was failing, and at the very tasks for which its millions of customers flocked to it. All of a sudden, the Everything Store wasn’t even as well stocked as, say, an urban corner store, or a gas station, or a smaller online retailer. To customers trying to place orders, it didn’t just seem overwhelmed — the site seemed broken, more like a sprawling, malfunctioning machine than a retailer under unusual stress. More than just failing them, it seemed to be exposing them to scams and exploitation, a peculiar sort of store that seemed to have lost control of its own shelves. There were signs of distress in Amazon’s vast network of fulfillment centers, too. Employees were falling ill. Some workers were staying home out of fear for their own health; others staged walkouts.
In so many ways, this was the future Amazon had been planning for: Brick-and-mortar stores were closed, consumers were eager to order all manner of things online and the brand was all but synonymous, already, with e-commerce. And yet in a statement released with Amazon’s first-quarter earnings, the company’s chief executive, Jeff Bezos, braced investors for a rocky period. ‘‘If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,’’ he said. About $4 billion in expected operating profit for the next quarter — ‘‘and perhaps a bit more’’ — would instead be absorbed into Covid-related expenses. The company had experienced a surge in demand, but quarterly operating income had fallen by 43 percent in North America year over year. Internationally, it had lost money. In the statement, Bezos praised his company’s ‘‘adaptability and durability’’ but said the Covid crisis had been ‘‘the hardest time we’ve ever faced.’’
In April, however, Amazon announced that it had hired 175,000 workers in its fulfillment-anddelivery network — a sign of supreme confidence. Wall Street, too, has proved to be more confident in the company than ever; after a brief dip at the height of Amazon’s Covid-related troubles, the company’s stock price is hovering near a record high, assuring Bezos’s status as the richest person in the world by a large margin. Indeed, few doubt that Amazon will overcome this ‘‘hardest time.’’ To customers and investors alike, the company has long been the alternative to modes of shopping that may now be in accelerated and terminal decline. But for a few weeks, Amazon — the borderline-magic website that makes things appear on your doorstep — showed us what it was really made of, revealing something more complicated and delicate than its seamless surface usually lets on: machinery half-built and already straining under its own success, supported by an army of invisible middlemen and kept running by hundreds of thousands of workers.
As of its most recent disclosure, Amazon employed 840,400 workers around the world. More than 150 million people subscribed to Prime, paying an annual fee in exchange for, among other things, access to free, fast shipping. In recent years, Amazon has been scaling up aggressively in virtually every dimension that matters: Each year, its systems are bolstered to handle more people, more demand, more volume, more stress. Since 2014, its revenue has tripled.
Entering 2020, well into its third decade of ruthless expansion, Amazon was operating with a powerful tailwind. More Americans were doing more shopping online; its biggest online competitors were still hopelessly behind; the collapse of American brick-and-mortar retail — Amazon’s true competition — was accelerating, and its acquisition of Whole Foods had successfully given the company a way into another industry on which it had ambitious designs. For regular customers, ordering from Amazon is less an experience than a routine — a repetitive, second-nature interaction with a machine that brings you things; a faint but recognizable consumer version of the processes that repeat, ever faster, in Amazon’s warehouses.
It benefits Amazon to be understood as an online store because it leads to underestimation. Amazon competes with Walmart, but Walmart isn’t its competition — at least not in the way that Target was to Walmart, or Walmart was to Kmart. Rather than a retail operation with a website, Amazon is better understood as a set of far more ambitious commerce-related systems overseen by a single company. This arrangement might be easiest to see in Amazon Web Services. Through A.W.S., Amazon rents hosting and computing infrastructure to companies big and small. Instead of buying, operating and updating their own data centers, clients including Netflix, Apple and the United States government rent space and computing power from Amazon. Where possible, Amazon engages with this infrastructure as something like a customer. Netflix runs on A.W.S. — but so does Amazon’s Netflix competitor, Prime Video.
Beneath the surface, Amazon’s retail operation works in much the same way. It is not a unified retail company through which Amazon sells products it has sourced or manufactured itself. It’s a platform connecting millions of customers with millions of sellers — none, of course, as large as Amazon itself. In exchange for a fee, Amazon lets a wide variety of parties sell goods through Amazon, right alongside those sold by Amazon. In exchange for more fees, Amazon will let you advertise those items against others, and its own. In accordance with another fee structure, Amazon will receive your products into its warehouses, process your orders and ship them to customers with the urgency associated with Amazon Prime, with which your listings will be badged. More than half of the products sold through Amazon are sold by third parties, many of which are effectively leasing floor space and logistics capacity — not computer servers but an actual work force — from the company. For brands and manufacturers, not entirely unlike regular users, Amazon is a thing you sign up for and give money to and then live inside, and with, for better or for worse.
Amazon’s systems are designed to scale up without clear limits. ‘‘On the internet, companies are scale businesses, characterized by high fixed costs and relatively low variable costs,’’ Bezos told Businessweek in 2001. ‘‘You can be two sizes: You can be big, or you can be small.’’ Amazon, two decades later, is a collection of systems that are either already big or that Bezos believes might one day become big: its stores, including Amazon, Zappos and Whole Foods; Amazon Web Services; its media platforms, Prime Video and Music, the Kindle store and Audible; its newer acquisitions and platforms, like the streaming site Twitch, or Ring, the home-security-camera company. Most Amazon investments are engineered for the possibility, at least, of category supremacy. Some have already achieved it.
by John Herrman, NY Times | Read more:
Image: Tyler Comrie
