How does Amazon know what 'essential' items you are wanting?
Toilet paper, board games, snacks, even sweat pant and sandals?
We know Amazon and other retailers read our minds and make it easy to purchase the items that are top of mind. But now third-party retailers are getting in the mix.
*Third-party sellers on Amazon.com Inc. and consultants are reporting that the e-commerce company has increased its suggested inventory levels and purchases of essential items, forcing other sellers to prioritize Amazon over their brick-and-mortar clients or risk hurting their bottom line - losing their "best seller" status, losing their sponsored ads and having their items de-prioritized in search results - if they run out of stock on the platform. An Amazon spokesperson said the site's algorithm is designed "to feature items we believe customers will want to purchase, and that includes items that are in-stock" and that the company overall is a relatively small player in the retail market.
At a time when much of the retail sector is collapsing, Amazon is strengthening its competitive position in ways that could outlast the pandemic — and that could raise antitrust concerns. Increasingly, manufacturers of in-demand products are catering to Amazon, while competing retailers take the leftovers, consultants and brand executives told ProPublica.
“Amazon has the power to bury sellers and suppliers if they don’t comply,” said Sally Hubbard, director of enforcement strategy at Open Markets Institute, a think tank that has been critical of Amazon and other big tech companies. “It might be automated through an algorithm, but it’s still the wrath of the monopolist that they are afraid of. ... Amazon is able to cut off its competitors’ access to inventory by leveraging its monopoly power.”
As locked-down shoppers have flocked to buy food, medicine, cleaning supplies and personal care products on Amazon, the retailer has in turn upped its suggested inventory levels for many manufacturers that sell their products on its platform. It has also expanded purchases of certain essential products that it sells directly to shoppers, often buying two or three times as much as it did before the pandemic, executives said.
One thing is certain, Amazon is looking to hire.
The company announced on March 16 that it would bring on an additional 100,000 workers, a goal it fulfilled. On April 13, Amazon said it would hire 75,000 more.
Oppenheimer analysts estimate that each new hire represents $75,000 in quarterly net online sales increase.
“We see upside to revenue as evidenced by Amazon hiring 175,000 additional workers to keep up with increasing demand, as well as a temporary pause of the third-party Fulfilled by Amazon business because of strain on fulfillment network,” analysts wrote.
Oppenheimer also sees benefits for Amazon in Target Corp.’s TGT, +2.42% business update, which included a 100% increase in digital sales for the quarter to date.