The race for the consumer’s whole paycheck has changed tremendously in the last few weeks – starting with the fact that over 30 million consumers who had paychecks eight weeks ago no longer do. And while the great economic closure is the most obvious and insidious of COVID-19’s effects, it is far from the only one.
Consumers, even those who are fully employed, have fully rewritten their lives and relocated much of their former real-world activity to the digital space, sparking the question: When recovery starts, will those consumers be willing to quickly abandon their new, digital-first habits? Even Walmart’s CEO Doug McMillon doubts it.
McMillion forecast earlier this week that shoppers wanting to pick up and ask for delivery would “become the new normal.” That sentiment, it seems, is reflected in PYMNTS’ latest survey of consumers, which indicates that the majority are in no rush to force an economic reopening, and that most are quite content to carry on with their digitally-enabled lifestyles.
“This is just speeding up the significant change the retail industry was already undergoing,” McMillon said.
As it turned out, change was in many ways the theme of the week, as both Amazon and Walmart’s races became about shifting their strategies and offerings in light of a changing environment.
Big News of the Week: The $4 Billion Cost of Fighting COVID-19
When Amazon’s earnings were reported earlier this week, there was no shortage of interesting information on display: the $75.45 billion in revenue, the $10.22 billion in revenue from AWS (its first time crossing the $10 billion threshold), the 8 percent spike in physical store sales (mostly from Whole Foods) that before March of this year had been on track to increase about 1 percent.
Amazon even addressed its greatly lengthened wait times for Prime members and its expanded workforce.
“It’s taking longer to get things into our warehouse than out of our warehouse,” CFO Brian Olsavsky told investors after earnings were announced, adding that it’s still unclear when operations will go back to normal. “The biggest questions we have in Q2 are about the ability to service that demand and the products people are ordering in a full way.” To that end, he noted, Amazon has now increased its workforce by 175,000.
But the big news out of the earnings report is that Amazon expects that its entire Q2 profit – roughly $4 billion – will go to the COVID-19 battle. Roughly $1 billion alone, Olsavsky noted, will go toward testing – first their own staff and then perhaps other community members as needed.
To Amazon’s credit, the company knew the announcement that Q2’s profit has already been spoken for would be an attention-getter.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” CEO Jeff Bezos wrote in the eCommerce giant’s earnings press release, confirming what most people have long suspected: Amazon never thinks small about anything.
Other than testing, according to Amazon, the funds will be geared toward PPE, enhanced warehouse and facilities cleaning, less efficient processing paths that better support social distancing measures and higher wages for hourly workers.
It’s a move that will, among other things, engender some goodwill toward Amazon at a time when it might be sorely needed – particularly since Congress members seem to, once again, have a lot of pointed questions for the company.
Regulatory Hot Water: Congress Requests That Mr. Bezos Goes To Washington
In the wake of reports that Amazon intentionally and illicitly used seller information to develop competing products, House Judiciary Committee members have requested that Chairman and CEO Jeff Bezos provide testimony on the eCommerce retailer’s private-label procedures, in addition to “other topics.”
Said legislators have written Bezos about the concerning allegations regarding the seller data, noting that that the reports come care of “over 20 former or current Amazon employees and the company’s internal documents.”
“If these allegations are true, then Amazon exploited its role as the largest online marketplace in the U.S. to appropriate the sensitive commercial data of individual marketplace sellers and then used that data to compete directly with those sellers.”
The latest letter and round of accusations come as the House has been investigating the market influence of Amazon as well as other massive technology companies. Thus far, eCommerce retailers have been participating in the investigation by giving the House panel documents, but it reportedly opposed the concept of Bezos offering testimony personally.
And speaking of preferring to do things quietly, but in an uplifting way…
Sneak of the Week: Undercover Delivery Service
Starting this week in Seattle, some downtown restaurants got a delivery option provided at no charge from Amazon. According to emerging reports, Amazon has covertly launched a free, ad-hoc restaurant delivery service using drivers and vehicles who were once tasked with shuttling its corporate executives around before they all started working from home.
Amazon pays the drivers, who work for a company called MV Transportation that runs a shuttle service for the tech giant. The deliveries are no-contact: Restaurants pack and place the food in the driver’s trunk and the driver drops the food at the front door.
From all accounts, this seems to be a temporary offering for local businesses struggling during the COVID-19 pandemic, and not, say, a precursor to a full-on Grubhub-like app. Unless, of course, Amazon is seizing the opportunity to gather some data on local food delivery, just in case they ever want to try another path to the consumer’s whole paycheck.
Big News of the Week: Walmart’s Quiet Advance Of COVID-19 Testing Centers
Among public health experts, politicians, business owners and everyday consumers, there is perhaps a single topic of universal consensus when it comes to the battle to reopen the economy: We, as a nation, need more testing. How much more is up for debate. But it’s widely agreed-upon that we need a clearer picture of who has had the virus and its mortality/morbidity statistics.
Getting those tests to happen has proved to be a bigger challenge than anyone anticipated. And that is an arena where Walmart has quietly stepped in to help. Unless one spends a lot of time reading local news reports, this fact could easily go unnoticed, since Walmart hasn’t released any press releases to national news outlets. But in Las Vegas, Orlando, El Paso and Detroit – with a sprinkling of other sites in Nevada, Florida, Texas and Michigan – drive-through testing centers for the COVID-19 virus have started to quietly open up.
The tests are available to the CDC-listed groups recommended to be tested, including first responders, healthcare providers, people with symptoms of COVID-19 and those who are high-risk but without symptoms. Test results are expected within an average of two days.
These tests will be done in people’s cars via a self-administered nasal swab, observed by a trained medical volunteer to ensure that the sample is taken correctly, and then the sealed sample will be dropped into a container on the way out of the drive-through site.
Reports indicate that Walmart is looking to add the serology (antibody finger prick) tests as soon as they become available at a wide enough scale to use in drive-in testing centers.
And while the immediate future of testing will be greatly boosted by Walmart’s efforts, it will be interesting to see whether the retailer’s long-term expansion into medical care will be boosted by its testing efforts today, as it will mark the start of people nationwide getting into the habit of going to a Walmart location to seek medical services.
But then, the takeaway of the week, as has been the case during most weeks of this pandemic, is that today’s investment in crisis mitigation is also tomorrow’s investment in the “new normal” of the entire commercial ecosystem.