The story of the week for Amazon and Walmart was the same story playing out in various forms throughout the U.S. economy — the unfolding COVID-19 outbreak and managing the various pieces of economic collateral damage being carried in its wake.
Both of the nation’s mega-retail players have spent the week strategizing how to strike a balance between three goals — protecting their thousands of employees, serving their massive customer bases and keeping supply chains operating at as close to normal as imaginable given the highly abnormal circumstances.
To say it has been a busy week is grossly underselling things.
Big News of the Week: Scaling Up, Dialing Back
Amazon’s most attention-getting release of the week was the news that in response to the surge in demand for eCommerce brought on by the wave of consumers stuck sitting home, it will be hiring 100,000 additional employees.
“Getting a priority item to your doorstep is vital as communities practice social distancing, particularly for the elderly and others with underlying health issues. We are seeing a significant increase in demand, which means our labor needs are unprecedented for this time of year,” Amazon said in the post. “We are opening 100,000 new full- and part-time positions across the U.S. in our fulfillment centers and delivery network to meet the surge in demand from people relying on Amazon’s service during this stressful time, particularly those most vulnerable to being out in public.”
Amazon is also bumping its employee pay by $2 an hour — up from its current base rate of $15.
But meeting the surge looks like it will be more than a matter of scaling up for the eCommerce giant. Amazon has also announced that it has for the time being shelved its Prime Pantry program, citing the need to restock in the face of an orders surge.
“Due to high order volumes, Pantry is not accepting new orders at this time,” the notice stated. “This means that items listed as ‘Ships & Sold from Pantry’ cannot be added to your cart. We apologize for this inconvenience and are working with our partners to get these items back in stock as quickly as possible,” Amazon noted on its website.
As of yet there are no target dates to re-open Prime Pantry.
Technical Issues: Grocery Supply Blues Part 1
Consumers using Amazon Fresh or ordering from Whole Foods this week ran up against a technical issue as the online ordering system overburdened by hunkered-down consumers was pushed past its capacity.
“As COVID-19 has spread, we’ve seen a significant increase in people shopping online for groceries,” an Amazon spokesperson said in a statement to media. “Today this resulted in a systems impact affecting our ability to deliver Amazon Fresh and Whole Foods Market orders tonight. We’re contacting customers, issuing concessions, and are working around the clock to quickly resolve the issue.”
The move comes as public health officials are encouraging consumers to steer clear of stores for essentials, fresh produce and clearing supplies, causing a spike in demand that Amazon confirms overpowered its capacity to bring items to consumers. Some consumers complained on social media with hashtags #coronapocalypse and #panicbuying.
But it seems the shortages now could have ripple effects going forward. One Washington State consumer noted that the entire experience during the coronavirus epidemic had left him reconsidering his Prime membership going forward as he has not been able to depend on it for items like garbage bags, bottled water and laundry detergent as of just after the outbreak started in the Seattle area.
The Seller Squeeze and Preparing for the Worst
Amazon announced this week that, as part of its efforts to keep its stocks level with expanded consumer demand, independent merchants will not be able to send merchandise to its warehouses except for household staples and medical products until early April.
A spokesperson for the eCommerce retailer said per the report, “We are temporarily prioritizing household staples, medical supplies and other high-demand products coming into our fulfillment centers so we can more quickly receive, restock, and ship these products to customers.”
That announcement comes as sellers on Amazon are also facing fallout from the international health crisis — particularly those who supply in part or in whole through China as production virtually shut down in face of the national outbreak of coronavirus earlier this year. And though retailers can still sell items that aren’t among coronavirus staples, the new inability to use the Fulfilled by Amazon (FBA) feature will affect some 53 percent of sellers, data from JungleScout indicates. The service stores and ships sellers’ inventory. FBA also gives sellers the ability to use two-day Prime shipping.
“We understand this is a change for our selling partners and appreciate their understanding as we temporarily prioritize these products for customers,” an Amazon spokesperson told CNBC.
And while Amazon has undoubtedly had a long week, that could cast long shadows over its next several months — it was far from alone in that boat this week. Walmart, for its part also spent much of the news cycle sprinting to keep up with a continually evolving and intensifying situation.
Big Play of the Week: Bonusing the Frontline Workforce
Given the major run on supplies happening across the U.S., it is not surprising that Walmart has borne the brunt of the physical consumer surge as the worried have crowded their locations to grab cleaning supplies, toilet paper and grocery items en masse.
To show its appreciation for the staffers braving the crowds and undertaking the incredibly difficult task of keeping shelves adequately stocked, Walmart has announced it will pay $550 million in bonuses to hourly workers.
“The bonus will be $300 for full-time hourly associates and $150 for part-time hourly associates and will add up to more than $365 million. Every hourly associate employed by the company as of March 1 will qualify, and it will pay out on April 2,” Walmart wrote in a blog post on the emergency bonus program.
Walmart further announced it would accelerate the next scheduled quarterly bonus for store, club and supply chain associates a month early to late April.
Dan Bartlett, the retailer’s executive vice president of corporate affairs, told CNBC that the businesses would honor employees for “performing Herculean efforts” and provide them with funds. He said per the report, “It’s almost like a mini stimulus package for Walmart associates.”
The biggest grocery in the country said the special bonuses would be over $365 million in total. Part-time hourly associates will receive a bonus of $150, while full-time hourly associates will receive a bonus of $300. Every hourly associate in Walmart’s employ as of March 1 will be eligible, and the bonus will be paid April 2.
Walmart is the nation’s largest private employer — with 1.3 million U.S.-based employees — so a mini-stimulus care of Walmart is actually a fairly large boost for the U.S. economy.
Technical Issues: Grocery Supply Blues Part 2
Like Amazon, Walmart’s order ahead and delivery capacity has been hit hard, and in some cases wholly overwhelmed the surge of consumers suddenly and all at once deciding nationwide to stock up on a few months’ worth of household supplies.
Thus far Walmart has officially reported grocery delivery outages in places like Tennessee, Nevada, North Carolina and Georgia, among other regions. There are also reports that even in areas where delivery and pickup are functional, outages are wide. Some shoppers report waiting seven days for items that are missing merchandise. There have also been reports that servers are going down in the face of increased demand.
To move to control the situation, over the last week Walmart has modified its store hours — and placed purchase limitations on certain items to make sure they can still be distributed widely. According to Walmart, included on that list are paper products, milk, eggs, cleaning supplies, hand sanitizer, water, diapers, wipes, formula and baby food.
“We know communities are counting on us more than ever and we are determined to serve the broadest number of customers and ensure they have access to the key items they are looking for,” Walmart said on its blog.
Healthcare Expansion: Drive-Thru Testing Coming Soon
As Walmart is working to manage the retail effects of the pandemic, it is also working with state and government officials to leverage its massive physical scale in the U.S. to enhance testing efforts.
Walmart CEO Doug McMillon has announced Walmart will host drive-thru coronavirus testing sites in the parking lots of some stores.
“By now you've likely seen the news reports that Walmart, along with other retailers and companies, is being asked by the federal government for support in standing up drive-thru testing sites for COVID-19,” McMillon wrote in an internal memo circulated to the media for review. “This is a government testing initiative, so location decisions and timing will be made by them,” the memo stated. “Testing will be in-car and at the far edge of the parking lot and all testing will be administered by federal health officials.”
Those select locations will get additional information from health officials, he said. Thus far an official list of locations has not been made public. McMillon noted that the testing locations are intended to scale up overtime.
“Together we will get through this unprecedented time and our focus has and always will be the well-being of our associates and customers,” McMillon said.
What that will mean for Walmart, for Amazon and for pretty much every player in the consumer ecosystem over the next week remains a question with an answer evolving day to day, as the needs of the situation are changing.
But whatever comes next, PYMNTS will be here to keep up current on the latest update.