Published on August 29, 2020
Jeff Bezos is back, managing Amazon’s role in the COVID-19 response and the global supply chain.
The e-commerce juggernaut opted to eschew profitability in the first quarter of 2020 to demonstrate solidarity and expand market share. Yet its powerful position as the dominant online retailer and critical logistics hub made it almost impossible to not profit in the second quarter. In fact, Amazon’s second quarter results blew away even the most optimistic expectations. The company reported a profit of $5.2 billion, more than double what it posted in the same period last year.
The e-commerce juggernaut has faced scrutiny from politicians and the public as fears of its outsized influence and capacity to crowd out competitors have mounted. The coronavirus outbreak offers Amazon a chance to recast itself as an essential, helpful part of the economy.
Consumer concern over big tech is widespread, as we found in the extensive survey at the heart of The Purpose Report. There is still widespread optimism among consumers that technology is changing life and society for the better (82%), but also general agreement that tech companies need to work together to ensure data privacy (84%) and to protect the integrity of public discourse (81%).
Amazon’s 2020 second-quarter financial performance surprised even its own management. CEO Jeff Bezos had warned investors earlier this year to expect a bumpy ride in 2020, suggesting that Amazon might post a 2Q loss of as much as $1.5 billion. The astonishing positive result is indicative of Amazon’s massive – and growing – importance to global commerce.
Remarkably, Amazon’s blowout profit in the second quarter came after spending $4 billion on “incremental COVID-19 related costs in the quarter to help keep employees safe and deliver products to customers,” as well as a wave of spending and hiring as the company further adapts to ongoing economic and social disruption:
- Created 175,000 new jobs, including 125,000 new full-time positions.
- Issued a $500 million bonus across its frontline and partner workforces.
- Increased hourly worker wages.
- Committed $27 million to Black Lives Matter, including $8.5 million from employees.
Leading With Purpose
Amazon’s CEO has not shied away from serving as the face of Amazon’s COVID-19 response, an uncharacteristic move for the usually press-shy billionaire.
Over the past few years, Bezos has stepped back from day-to-day operations of Amazon, instead focusing on growth strategy. When COVID-19 struck, Bezos initially went almost totally dark. However, as the crisis intensified he took charge.
In an April 16 letter to shareholders, Bezos made it clear that he was back in the driver’s seat: “For now, my own time and thinking continues to be focused on COVID-19 and how Amazon can help while we’re in the middle of it.” This newfound attentiveness to daily operations is not merely rhetorical. As the New York Times reported on April 22, Bezos “is holding daily calls to help make decisions about inventory and testing, as well as how and when — down to the minute — Amazon responds to public criticism.”
On April 9, Bezos made a highly publicized visit to an Amazon fulfillment center, aiming to show his commitment to supporting the thousands of workers essential to maintaining the company’s sprawling supply chain. Taking to Instagram, Bezos hammered this message home, reaffirming Amazon’s brand purpose as a safe, trusted and essential service provider: “We’re all incredibly proud of the thousands of our colleagues working on the front lines to get critical goods to people everywhere during this crisis.”
Bezos, the world’s wealthiest man, has also opened his pocketbook, donating $100 million to Feeding America,
Operating With Purpose
Amazon has taken steps to adapt its supply chain and commercial ecosystem to COVID-19. The company is temporarily favoring sales and fulfillment of household staples, medical supplies and other high-demand essential products. By prioritizing essential products and adopting an almost wartime attitude toward supply priorities, Amazon is able to rise above criticisms about practices that harm small businesses.
Amazon is also leveraging its Alexa home assistant product to educate customers about COVID-19; they can ask, “Alexa, what do I do if I think I have COVID-19?” and she will ask a series of questions and provide Centers for Disease Control and Prevention guidance based on their risk level and symptoms. This should further normalize the use of voice-activated tools in households, forging associations with health and good information rather than negative perceptions of snooping and data mining.
Amazon has also pared its business strategy to expand its market share. The company has decided to eschew profitability during the crisis to achieve this, as Bezos explained during Amazon’s April 30 investor call: “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.’”
Adapting Marketing Strategy
Amazon’s market strategy has been extremely reactive to the impacts of COVID-19. With its supply chains stretched and parts of its workforce locked down, Amazon has adapted its messaging to encourage less, rather than more, consumption, as Forbes reported on April 19: “Amazon has been culling consumption in a variety of ways during the COVID-19 pandemic. This week, Amazon went a step further and actively pushed consumers not to buy things they don’t need by not promoting items, not showing you what others bought and other tactics all to slow consumption and make sure the wheels don’t come off the cart.”
Amazon has pivoted away from Google Ads as part of its broader strategy of prioritizing essentials in a time of crisis. Yet it has not stopped developing responsive advertising content. A new video commercial debuted on TV and social media on April 1 titled “Thank You Amazon Heroes,” in which it highlights the contributions of its frontline workers to keeping essential shipping moving: “Right now, delivering the things that people need has never been more important. To all of our Amazon retail heroes, on the floor, in the air and behind the wheel, we want to thank you. We’ll continue to do everything we can to keep you healthy, safe and protected. The work you are doing means everything right now. Thank you.”
Supporting Communities
Amazon has pledged significant financial resources to people and communities impacted by COVID-19, including cash donations and grants:
- A $20 million AWS Diagnostic Initiative to fund COVID-19 research.
- $100 million from Bezos to Feeding America.
- A $5 million grant fund to support small businesses in Seattle.
Amazon has also donated resources and materials to communities, with a particular emphasis on providing schools with tools and hardware necessary for a successful online learning environment:
- No-cost resources to support virtual classrooms.
- 8,200 laptops to Seattle Public School students who do not have access to computers at home.
- 4,000 laptops to high school students nationwide, and providing them with free computer science resources and exam prep resources.
With the global economy in turmoil and unemployment reaching historic levels, few companies are hiring right now. Amazon is one of the exceptions, having announced 100,000 new part-time and full-time employees, with another 75,000 more positions set to be filled.
Protecting Employees
While Amazon has faced criticism for its struggles to respond quickly to coronavirus cases among its vast global workforce, the company has been working rapidly to improve its processes to keep employees safe.
Amazon has already instituted more than 150 process updates to improve employee safety, including enhanced cleaning, social distancing policies and disinfectant spraying. While Amazon works to build scalable coronavirus testing infrastructure, it has already distributed personal protective equipment and enforced temperature checks at all facilities.
Amazon has also worked to encourage employees with financial incentives to keep coming to work, as well as new private disaster relief provisions:
- Increased pay for hourly employees by $2 per hour.
- Doubled regular hourly base pay for every overtime hour worked and promised extra time off with full pay for infected employees.
- Established a $25 million relief fund for partners, such as delivery drivers, and seasonal associates facing financial hardship or quarantine.
Serving Customers
With many brick-and-mortar stores shuttered, Amazon has been slammed with orders from consumers. The company has worked to enhance capacity, safety and convenience for customers, both online and physical:
- Grocery delivery capacity expanded at Amazon Fresh and Whole Foods.
- Option for “unattended delivery” now available for customers who want to avoid contact/proximity to delivery drivers.
- Enhanced cleaning protocols enforced at all Whole Foods stores.
- Whole Foods schedules altered to open one hour early each day for customers aged 60 and over.
- Vigorous monitoring to prevent price gouging.
- Item return windows expanded for customer convenience.