business news in context, analysis with attitude

There are a number of Amazon stories this morning…

•  The Information gets specific about how Amazon is dealing with an admitted surplus of warehouse square footage overbuilt during the pandemic:

"Over the last three months, Amazon has canceled plans for nearly 10 million square feet of warehouse space, shelving plans for more than a dozen fulfillment centers and delivery facilities around the U.S. as the company wrestles with a costly space glut on the heels of the pandemic.

"The scope of the pullback, which is previously unreported, shows how quickly Amazon has reversed course on an aggressive build-out. Amazon shuttered a former Cadillac dealership in Manhattan that it had turned into a hub for last-mile delivery outfitted with e-cargo bikes. And it’s working to find new tenants to sublease two sprawling fulfillment centers built to its specifications, among many others.

"The moves mark a notable departure from Amazon’s historical expansion strategy, in which the company typically was more comfortable having excess capacity that it could grow into, one former senior Amazon fulfillment executive told The Information."

The story goes on:

"This is likely just the beginning of a significant retrenchment for Amazon, which recently told investors that warehouse overcapacity added $2 billion in costs last quarter, compared with the same period a year earlier. MWPVL president Marc Wulfraat, who has been tracking Amazon’s physical footprint for more than a decade, describes the 8.3 million square feet as 'just a drop in the bucket.'  He predicts that by the year’s end, Amazon will have abandoned plans to open 30 million more square feet of warehouse space, effectively cutting its estimated expansion goals for 2022 in half."

The bottom line, according to one analyst:  "If the shovel is not in the ground, they’re going to cancel."

•  From the Seattle Times:

"One in 5 delivery drivers working for Amazon was injured on the job in 2021, a new report says.

"The same report, released Tuesday by a coalition of labor unions, found 1 in 7 was injured so severely they had to either change their job or take time off following an injury … Injuries for workers in Amazon’s delivery system — including delivery drivers as well as employees at delivery stations and sortation centers — jumped by 38% in the past year, according to the organizing center, which has pushed Amazon to changes workplace policies previously. The same group released a report in April that found injuries at Amazon warehouses increased about 20% from 2020 to 2021.

The rate of serious injuries for drivers jumped 47% in the past year, according to the most recent report."

“Amazon’s delivery quotas and production pressure are contributing to an escalating injury crisis among workers in every segment of Amazon’s delivery system,” the Strategic Organizing Center’s report read.

Amazon spokesperson Kelly Nantel said the report used a small sample of workers and drivers to “intentionally misrepresent the facts.”

“Safety is a priority across our network, which is why we’ve rolled out technology like innovative camera systems that have helped lead to an overall reduction in accident rates of nearly 50%,” Nantel said. “We’ll keep investing in new safety tools to try and get better every day.”

•  From the New York Times, an OnTech newsletter from writer Shira Ovide that focuses on an intriguing shift in Amazon's sales mix:

"One essential ingredient for Amazon’s success is the explosion of businesses based in China that sell products through its vast digital mall.

"But starting more than a year ago, Chinese businesses have steadily been selling a smaller share of stuff that Americans buy on Amazon. Merchants based in the U.S. are gaining ground.

"Experts told me that they didn’t have a satisfying explanation for this shifting balance of Amazon merchants in the U.S. and China. Nor could they say whether it’s a blip or a lasting reversal of what had been a long trend of growing market share for Chinese merchants.

"At the moment, most shoppers wouldn’t notice that Chinese merchants are selling relatively less stuff on Amazon. And the change may be another example of unpredictable shifts in shopping prompted by the pandemic.

"But Amazon’s aggressive effort to court Chinese merchants over the past half decade led to a profound and trendsetting change in online retail and the global economy. If that phenomenon has lost steam, it is worth watching for what it might mean for shoppers, international trade and the millions of businesses that earn their livelihood from selling on Amazon and elsewhere online."

The story goes on:

"Chinese merchants have been a source of Amazon’s power and among the company’s biggest headaches. They are a big reason you can find almost any product on Amazon, and they have probably helped lower prices for shoppers. But Amazon’s critics also say that the company hasn’t done enough to protect shoppers from dangerous or subpar products and from manipulated customer reviews from Chinese sellers that may be out of the reach of U.S. consumer protection laws.

"Over the past few years, Chinese merchants sold a growing percentage of what Americans bought on Amazon until there was a roughly 50-50 split between sellers based in the U.S. and China. The percentage sold by Chinese merchants, however, has declined to about 42 percent in May from about 48 percent in late 2020, according to the e-commerce research firm Marketplace Pulse … Merchants based in the U.S. are capturing a bigger chunk of sales instead."

It isn't just happening in the US, the story says:  "Domestic Amazon merchants have also been selling more relative to Chinese merchants in Britain and Germany."

KC's View:

I make the "day two" reference because, while Amazon's mantra is "today is Day One" always has stressed the fact that complacency is to be avoided and a consistent startup/disruptive mentality is to be embraced, the fact is that there always are repercussions from past decisions.

Whether it is dealing a glut of real estate resulting from a too-aggressive approach to warehouse development … figuring out how to mitigate safety issues affecting its workers (and let's concede that this is a union-generated report, so there's an implicit bias, though that doesn't mean the results are inaccurate) … or navigating shifts in vendor behavior that could have an impact on product availability to consumers … Amazon is spinning a lot of plates at the moment.  And that doesn't include threats from new legislation and regulation.

Welcome to Day Two.