Drastic measures are going to have to be taken this holiday season to make sure that inventory and online orders arrive on time. But don't worry, Amazon has a plan.
Adobe is projecting this year that consumers will spend $207 billion online, a rise of 10% from last year, according to Bloomberg. This means that dodging supply chain and logistics issues is a must for retailers like Amazon.
Amazon is going to be chartering additional ships and has already hired 150,000 seasonal workers to help with shipping and packing this holiday season. It is enticing them with bonuses of up to $3,000 and higher than usual pay.
Additional costs, like chartering ships and dispatching half-full trucks, could ultimately amount to $4 billion, which would be enough to wipe out the company's profit during Q4. But Amazon sees the holidays as an "opportunity to extend its advantage over rivals," Bloomberg reports. Even if that means sacrificing profits to get the job done.
Jason Murray, a former Amazon employee who led teams working on logistics software, told Bloomberg: “There are structural advantages you have in redundancy if you’re Amazon. Amazon has its own transportation network, it has access to all the carriers. Multiple ships, multiple factories.”
Merchants on Amazon's marketplace are also now being forced to use the company's global shipping service. David Knopfler, whose Brooklyn-based Lights.com sells home décor and lighting fixtures, said: “Amazon had space on ships and I couldn’t say no to anyone. If Kim Jong Un had a container, I might take it, too. I can’t be idealistic.”
He called Amazon's prices to ship "phenomenal", at $4,000 to ship a container from China compared to $12,000 demanded elsewhere.
Other retailers like Walmart have also chartered other ships, but Amazon has been preparing for this type of shift since the mid 2010's, the report said, putting them at an advantage.
Steve Ferreira, an ocean freight consultant, said: “They basically went from zero containers a month a few years ago, to over 10,000 containers a month. The thing is an 800-pound gorilla now.”
Additionally, Amazon now has chartered aircraft they can tap: they own 85 planes that can move inventory between 40 airports in the U.S.
Bernie Thompson, CEO of Plugable Technologies, who has used Amazon's air service, said about the high cost of air freight: “As long as we don’t have stuff stranded on boats, it’s worth it.”
But most important will be Amazon's own cargo this holiday season - even if it spikes costs slightly.
David Glick, a former Amazon logistics executive, concluded: “Amazon will stick to its guns and get things to customers. It’s going to be expensive but, in the long term, builds customer trust.”