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Don’t Blame Amazon for Cleaning Up in Lockdown

Alex Webb and Andrea Felsted

(Bloomberg Opinion) -- Amazon.com Inc. has come under pressure in a locked-down Europe for doing what it does best: selling consumers everything they need.

An appeals court in France on Friday said the U.S. online retailing giant must limit its range to essential items: food, health products and computer equipment. In Germany, competition authorities are monitoring the company after complaints from retailers. It has endured strikes over working conditions in Italy. The grievances differ in each country, and Amazon is contesting them. 

But the crisis has also cast the defects of its brick-and-mortar competitors into sharp relief. Amazon appears to be dominating partly because of years of missteps from its rivals on Main Street, as well as the company’s sheer brazenness. Where traditional retailers have been cautious about putting staff at risk or appearing insensitive to the health-care crisis, Amazon has carried on filling orders as best as it can.

Some online-savvy competitors have also done well. But no one has matched the e-commerce behemoth’s ability to supply homebound consumers with a similarly wide selection and dependable service. And in this unsettling time, everyone’s definition of an urgent essential item is slightly different, spanning books and extension cords to electric toothbrushes and Pilates mats.

Other retailers erred on the side of caution when it came to the various national patchworks of lockdown rules.

For example, government guidance in the U.K. about which retailers should shut their physical doors was inconsistent. While bicycle shops could stay open, those selling electronics were forced to close. Even in sectors allowed to keep operating, some retailers, such as Kingfisher Plc’s home-improvement chain B&Q, closed shops to protect employees and customers. (It has since reopened 215 stores.) Online, retailers in Britain also faced fits and starts. Some temporarily limited their ranges to handle panic buying. Drugstore operator Boots, owned by U.S. giant Walgreens Boots Alliance Inc., did so to meet the frenzy for paracetamol and hand sanitizer.

While understandable in many cases, and admirable in some, every instance where a company shut its doors or restricted available merchandise simply handed another advantage to Amazon.

The picture is slightly different in the U.S., where a wider range of retailers has kept trading. Not only were Walmart Inc. and Target Corp. able to continue selling general merchandise alongside food, they also benefited from their investments in e-commerce. Target said last week that its digital sales in April had risen by more than 275%.

Even as others have benefited from the heightened demand, Amazon has some massive supply chain advantages. It’s not just the dominance of the company’s 175 fulfillment centers with their combined 150 million square feet of space dotted around the world. It’s also the efficiency with which that space and its contents are managed: Amazon relies heavily on automation both to whizz products around its warehouses, and to order the stock for them. In the book “Always Day One,” the journalist Alex Kantrowitz explained how Amazon uses its 25 years of data on customer orders to predict demand in any particular zip code.

Traditionally, a so-called “vendor manager” would work with a brand to decide how much of a given product — Kantrowitz uses the example of Tide detergent — to stock at a given warehouse. Back in 2012, Amazon started developing an automated solution to determine what products were needed, the quantity, and the price. That resulted in a system it dubbed “Hands off the Wheel,” where humans play a far more limited role in managing stock; each vendor manager is now responsible for tens of thousands products, compared with several hundred a few years back.

A system like that comes into its own during the current crisis — ensuring that warehouses are replete with the products they’re most likely to need. It might also explain the company’s decision to extend the temporary closing of its warehouses in France in response to the court’s ruling: Unpicking its vastly complex automated stocking operations to focus on a few discrete products is surely incredibly difficult, though not impossible. 

For competitors, replicating the Amazon approach is a tricky task, particularly in a condensed time frame. And retailers’ caution over how to handle the virus was understandable. Reputations will be won or lost on how companies behaved during the crisis.

While criticism of Amazon’s working practices has popped up around the world, it continues to hoover up customer dollars. Call it the Ryanair effect. The airline last year came dead last in Which? magazine’s annual customer satisfaction survey for the sixth time in a row. Yet its 10 billion-euro ($10.8 billion) market capitalization still makes it bigger than Deutsche Lufthansa AG and British Airways parent International Consolidated Airlines Group combined. Amazon’s business too seems immune to criticism, though it doesn’t have Ryanair’s customer satisfaction issues.

Its popularity should endure when the world returns to some semblance of normality. For a variety of reasons — avoidance of crowds, for one — many of the sales made online during the pandemic won’t return to brick-and-mortar stores even when they open back up. This year’s jump in U.S. online retail sales, including groceries, to about 17.2% of overall sales, from 13.9% in 2019, will effectively condense two years’ growth into one, according to GlobalData. In the U.K., the proportion of online sales reached a record 22.3% in March, according to the Office for National Statistics.

Amazon’s performance during the pandemic means it will be in pole position to capture the extra spending via a click of a mouse or tap of a smartphone. Speed and ease make up for a lot of sins.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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