“If retailers thought consumers were demanding before the coronavirus arrived, just wait until the virus is gone and consumers let their voices be heard.”
Amazon (AMZN) told consumers this past week that its paid-subscription Prime service is facing monthlong delays in shipping due to the coronavirus outbreak and that the company will focus on stocking and delivering higher-priority items.
“This has resulted in some of our delivery promises being longer than usual,” the company said in a statement.
The e-commerce giant also temporarily closed its Prime Pantry delivery service as it faces a surge in orders stemming from the pandemic.
A new dawn
Only two weeks ago, the e-retailing and logistics giant shutting down or suspending its same day or two-day delivery services would have been unthinkable.
In a battle that seemed to intensify weekly, Amazon and fellow retail behemoth Walmart (WMT) have been competing to see who can get stuff to consumers the fastest, announcing initiative after initiative to shave days and hours off delivery times.
But that was then, pre-coronavirus. This is now, when panic-buying has depleted grocery store shelves and hospitals face dire shortages of medical supplies, upending long-held beliefs about consumer purchasing and raising questions about institutional purchasing habits and supply chain practices.
Among those debates is whether the supply chain is overly infatuated with fast shipping, and whether there is a better way of managing e-commerce and retail to prevent shortages.
Too little, too late
Amazon did not immediately respond to FreightWaves’ request for comment.
But Brittain Ladd, a former Amazon executive who now runs his own consultancy, said the coronavirus had uncovered “a flaw in the supply chains of retailers.” In order to reduce costs, he explained, retailers carried less inventory, yielding efficient supply chains, not responsive supply chains.
“Most analysts have failed to understand that what consumers want isn’t speed, they want certainty or what I refer to as a repeatable and reproducible experience,” Ladd told FreightWaves.
Once the crisis ebbs, Ladd believes, consumers will expect retailers to carry more inventory and create logistics networks that eliminate the risk of store shelves being empty and ensure that online deliveries arrive as scheduled.
The subject of fast shipping and responsive inventory came up during a freight-tech roundtable discussion last week. “I think we do have a generation of MBAs who think inventory is evil and must be rooted out at all costs,” said Ryan Petersen, the CEO of Flexport, a global freight-forwarding platform.
That perspective will likely undergo a rethink in light of the coronavirus outbreak, he believes.
Petersen also defended fast delivery, arguing that “optimizing for one-hour delivery makes the supply chain more resilient.”
While he doesn’t think the move toward real-time fast delivery “hurts us,” he does question optimizing for just-in-time manufacturing, a supply chain process that acquires and produces inventory as soon as it is needed or ready to be sold.
“The way you get fast delivery is by having lots more inventory all over the country. In order to achieve fast delivery, you have to have more delivery in stock.”
Michael Krakaris is the co-founder of Deliverr, a software platform that aims to enable merchants to offer free two-day delivery anywhere they sell.
Delivery times are becoming more, not less important, as more Americans stay home due to the coronavirus outbreak, Krakaris told FreightWaves. “When physical retail goes away, which is what’s happened overnight, there is an increasing emphasis on delivery times.”
Deliverr’s next-day-enabled items are moving at “extremely high velocity,” he said. Art supplies are extremely popular right now, he added. So is shampoo.
The end of the tunnel
As the supply chain races to meet demand in a rapidly changing crisis environment, industry is turning its attention to the long-term impacts.
Retailers will need to “pre-position inventory” and automate their supply chains to maximize manufacturing and fulfillment speeds, Ladd predicted.
He believes automated micro-fulfillment centers — like those offered by AutoStore capable of automating online grocery fulfillment — will need to be installed inside stores so they can operate 24/7, 365 days per year as long as the center is fed inventory.
Regardless of solution, the pandemic will irrevocably shape the retail landscape, although power will remain, as always, in the hands of the purchasers.
“If retailers thought consumers were demanding before the coronavirus arrived,” Ladd said, “just wait until the virus is gone and consumers let their voices be heard.”
Yeahright Noway
The problem for Amazon will be how to convince people to pay for membership when they have nothing to offer that anyone would want to pay $156 a year for. Their video and music services are pathetic. Without Prime, Amazon shoppers still get free shipping…they just have to spend $35 or more. I’ve just let my membership lapse, and without fast, reliable shipping, my 8 years as a Prime member will definitely be ending.
John
I got a complete refund for my Prime membership. Since amazon can’t honor their agreement for fast shipping, we deserve a refund, and I got it. This is just a way for Bezos to save hundreds of thousands of dollars on shipping due to the increased at home shoppers. Every other store I’ve ordered from has gotten my stuff to me in 2-3 business days. Sephora, Ulta, jcpenny, Macy’s, etc…
Akiko Yamagami
Once the crisis ebbs, I want consumers to realize that they were the part of the major problem of empty shelves by panic-buying. It is one thing for the logistics industry to rethink inventory holding levels, but I think there is a role for the industry to educate the public ramifications of their own panic actions.
Gemstoneprincess
Well it makes sense, they went from warehousing to on time delivery…So one truck brings in a load and it is off loaded quickly, broken down and placed on several trucks that distribute it locally.
That model might change slightly for non- perishables like beans, rice, toilet paper, or the American people might become a little more aware of how important a well stocked pantry really is.
Even as we pull out of this there should be limits on the Essentials, allowing people to come to their senses.
The biggest problem I see is we have a near non-existent manufacturing base in this country leaving us absolutely vulnerable.
On another note, Amazon needs to refund or extend it’s service to account for the time we are not being provided with what we have purchased. If they do not acknowledge this, I will cancel my service. Why pay out for a product that is not operating as promised. They pay their employees shit for wages with a bare bones benefit package and now want the consumer to take a bite…China has made the Waltons and Bezos the ultrarich, but China has screwed the rest of us over big time. With no sanctions being sought to address the loss of lives or the damage to the economy.
Bill Hood
They will have to do something. We are coming into IFTA tax season and I need a new chair. First stop, Amazon.
APRIL 25th!?! Next stop, Office Depot. Tomorrow.
I had a question on my webcam so I googled it and of course, all the places that sell it popped up. I noticed my $50 webcam had a $250+ price tag on Amazon. While other stores had the regular price and out of stock. Amazon must consider it essential because they would deliver it in 3-days.
Even with a refund or extension of services my shopping habits will change based on how they are responding to all this.
Elorea
Exactly. If they’re suspending speedy delivery now, I understand, but if that goes away permanently, then they owe us a refund on our membership and reduce the cost going forward. I realize they offer other things along with the fast shipping, but if they renege on the delivery speed, they need to reduce the price of membership to reflect that change.
Ron K
You’re right, I think we deserve an extension of our paid periods, at least. I understand they can’t deliver as promised right now, but I do think they need to make good on their promise via an extension.
And maybe I’m reading it wrong, but the guy in this article that says consumers don’t care about fast – NO! WRONG! I love getting my stuff in the next day or 2, and I don’t want that to change. Extenuating circumstances right now, of course, but even when something was out of stock Amazon was good about getting it to me as quickly as they could. What I didn’t like is sometimes when something is promised for 2 days but then takes 4 or 5…I hope they can fix that. Setting proper expectations goes a long way.