Amazon Prime Day is slowing online sales growth | Health-med-fit

Amazon is heading to Tuesday’s annual Prime Day sale event in a very different way than it did in a pandemic.

The company has been using it for a long time 2-day event It’s one of the biggest in the year to seduce people to prime membership, where Amazon recently raised its price from $ 119 a year to $ 139 a year.

Amazon hasn’t disclosed Prime Day results, but research firm Insider Intelligence said that mid-July of the event was about $ 12.5 billion in global sales compared to last year, or 17% compared to last year. It suggests that it may increase. The June date will allow the company to attract more consumers shopping in the new semester.

Still, growth is slowing. According to Insider Intelligence, last year’s sales increased 8%, well below the 67.9% and 43% surges in 2019 and 2020, respectively.

Amazon can use a good boost. Once a darling of the pandemic economy, the company Rare quarterly loss April, the slowest revenue growth rate in almost 20 years (7%). Inflation has added a cost of approximately $ 2 billion.

Amazon also acknowledges that there are too many workers, and expects surplus capacity from a large warehouse expansion during a pandemic to add a total of $ 10 billion in additional costs in the first half of this year.

Neil Saunders, Managing Director of Global Data Retail, said:

This has been a significant reversal since the early days of the pandemic, when e-commerce giants’ profits surged, as home shoppers turned to online shopping to avoid being infected with the coronavirus. Demand was so high that Amazon nearly doubled its workforce to over 1.6 million in the last two years.

We also increased the capacity of our warehouse to accommodate the avalanche of orders flooding the site. By the end of 2021, Amazon had leased and owned approximately 387.1 million square feet of space for its warehouses and data centers. This is more than double the space reported in 2019.

After that, the worst pandemic was alleviated. Americans found it more comfortable to leave the house, and demand slowed down altogether. According to Insider Intelligence, online retail sales growth in the US retail sector, which surged to 36.4% in 2020, returned to more normal growth in 2021 and 2022, at 17.8% and 9.4%, respectively.

June retail sales, due out on Friday, will give a better idea of ​​how e-commerce is progressing. Online sales fell 1% in May’s latest figures, Overall retail sales fell 0.3% From April amid rising inflation.

“This is a time when consumers are far more frugal about their spending and purchasing methods,” said David Nikelk, former Amazon vice president of human resources who oversaw operations. “It’s affecting Amazon.”

Brian Olsavsky, the company’s chief financial officer, said many of Amazon’s warehouse expansion decisions date back two years and limit the company’s ability to make adjustments in the middle of the year. increase. That said, Amazon will spend less on warehousing projects this year than last year, and transportation investment will be flat to slightly lower.

Excess capacity is likely to be a short-term issue for Amazon, Saunders said, and points out that it continues to take steps to grow its retail business and attract more sellers to its services. .. In April, we announced that we would extend the benefits of Prime subscriptions to online stores other than our own site. This will give merchants access to the company’s vast fulfillment and distribution network.

To solve the warehouse problem, CEO Andy Jassy said in May that the company plans to revoke some leases and postpone the construction of others. Amazon is also subleasing warehouses to reduce costs.

According to preliminary data from real estate market provider Costar Group, the company is disproportionately closing small facilities that tend to be inefficient due to the lack of loading docks and parking, Costar’s US Industrial Analysis Director. Adrian Ponsen said.

Still, the closure is already causing problems. Several workers at Amazon’s delivery station in Bellmawr, NJ, recently quit their jobs to protest the transfer to other sites after Amazon decided to close the facility.

Paul Brandel, an Amazon worker who led the strike, said some workers wanted to move to a nearby facility after being asked to go 20 miles away. They also wanted a $ 1 hourly salary increase to make up for the turmoil. Meanwhile, according to the company, employees are given the opportunity to move to other sites with better perks.

Amazon has shown that another problem, overstaffing, has occurred after starting new recruit training to fill workers who were ill when the Omicron variant swept across the country last year. But when the sick workers returned, Amazon had too many people, adding about $ 2 billion in costs. This is far from last year when the company raised wages to $ 18 to attract hourly workers in a tough labor market.

This problem can be resolved naturally by the company’s high turnover rate. Amazon is likely to find use for surplus work as vacations approach, and may be able to curb the problem by not hiring new workers in overstaffed areas, Sanders said.

However, analysts are closely watching how Jasie tries to correct the ship. a few weeks ago, He tapped Doug HerringtonWill replace Dave Clark, a 17-year Amazon veteran and former head of Amazon’s retail business.

Amazon’s stock price fell this year, down about 39% year-on-year. And Jasie is under the gun to regain profitability, Kneeker said.

“He promised shareholders and others to really focus on regaining the profitability of the company,” Niker said. “And most of it is the consumer business.”

Amazon Prime Day is slowing online sales growth | Health-med-fit

Source link Amazon Prime Day is slowing online sales growth | Health-med-fit

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