Why the Coronavirus Is a Threat to Amazon
Businesses around the world are feeling the pinch
As an eCommerce professional, I’m acutely aware that supply chains operate on a global scale. The vast majority of inventory originates in the east, China mostly, which is then shipped to Western economies.
While stating the obvious I’m not trying to scaremonger readers out there, but the fact is that there are too many red flags to ignore.
What lies ahead is anybody’s guess. The World Health Organisation has stopped short of announcing a full-blown Pandemic.
Thus far, the impact on business is being felt around the world.
Now, I’m no expert i.e. I don't know the criteria to qualify a Pandemic, but if this were to happen the ramifications could be significant, not to mention the human health implications for victims and their families.
“Amazon merchants curb ad spending and hike prices as coronavirus threatens orders.” (Soper, 2020)
I write this from Ireland, an island nation. Like Australia we’re highly reliant on imports and exports, so the risks are elevated.
In fact, exports are the lifeblood of the Irish economy. If this were to dry up, the shockwaves could be severe.
I’m unsure if the same holds true for my Aussie friends? Maybe George J. Ziogas or Dr. Mehmet Yildiz could shed light on this.
With that in mind, what threat does this pose to the leading marketplace in the western world and indeed the wider economic online trade?
Revenue
Sales will suffer, plain and simple. No business is untouchable.
The pain doesn't end there. No. Revenue generated from sales, shipping and Ads is coming under increasing pressure as the global supply machine is starting to billow smoke.
That’s never a good sign.
“When the U.S. sneezes, the rest of the world catches cold.”
An obvious indicator is evident from tumbling share prices, worldwide.
This year Amazon’s share price rose steadily, until last week. In recent days it has since taken a sharp decline, back to where it was at the start of 2020.
To put things into perspective, the New York Times article: Stock Market Continues to Plummet in Worst Week Since 2008, summarises as follows:
— In Europe, the FTSE 100 in Britain fell more than 3 percent and the DAX in Germany fell more than 4 percent.
— In Asia, the Nikkei 225 in Japan closed down 3.7 percent, the KOSPI in South Korea dropped 3.3 percent and the Shanghai Composite in China dropped 3.7 percent.
— Oil prices continued a drop, reflecting decreased demand as factories and transportation slow down.
— Investors have also poured into investments like gold and government bonds, which are generally considered safer. (Nytimes.com, 2020)
Share prices only tell part of the story. The real story is in the virtual world, the silence —listen to ‘What’s not being said’.
Amazon
Beyond Amazon, there are plenty of marketplaces that will feel the pinch once the supply shortage hits their merchants, like Bol, eBay, and TMall.
From a Western perspective, Amazon is most at risk given that those “spooked by the coronavirus fallout are curtailing their ad spending” (Soper, 2020).
“In particular, small sellers are buying fewer ads on the site to reduce demand in the event of supply disruptions. And they are starting to raise prices too.” (Soper, 2020)
Amazon merchant, Chuck Gregorich, a seller of “China-made patio furniture” said that “if we’re going to run out, why not run out at a full price. We have to make sure the sales we have been as profitable as they can be.” (Soper, 2019)
Amazingly, Gregorich expects:
“to lose as much as $2m (€1.8m) in sales this year due to factory closures and other coronavirus-related slowdowns.” (Soper, 2019)
Advertising
For a long time, Google held the mantle in the pay-per-click space. Until a few years ago when Facebook entered the fray.
More recently, Amazon has thrown its hat into the ring to claim a piece of this gravy-train.
“Amazon merchants spent about 6pc less on advertising over the past two weeks than they did a year ago.” — Daniel Knijnik, Quartile Digital
If Amazon has witnessed a 6% slide in the last 2 weeks, what does this mean for veterans in the PPC world like Facebook and Google?
The image below might shed some light on this:
Or maybe not.
As you can see from my search results above (Google Chrome, Ireland) it seems that there is Zero impact on Google.
Is this evidence that the Coronavirus has leaped species —from humankind to virtual — morphing into a Cyber Virus?
Unlikely.
Rather Google is not displaying the true results that reveal the impact on it’s PPC performance trends of late.
If you replace the word ‘Google’ with ‘Amazon’ though, there’s a whole different story — go figure!
Final Thoughts
To conclude, here are 10 snippets worth considering, guidelines that we should all take note of:
- Your health is your wealth
- If in doubt, refer to your national health service website
- Google will lie to you, or at least hide the truth
- So will Facebook
- And Amazon too
- You don't need to buy from Amazon today
- A Pandemic will arrest the commercial world, temporarily
- You can work from home and write more ;)
- Listen to ‘What’s not being said’ (see Google search above)
- Lastly — did I mention that Your health is your wealth?
If Jeff Bezos loses a few Billion dollars next week or next month, so what, he’ll still be a multi-billionaire.
On that note, take-care folks because you are the leaders of tomorrow!
References
- Ali, F. (2019). Infographic: What are the top online marketplaces?. [online] Digital Commerce 360. Available at: https://www.digitalcommerce360.com [Accessed 28 Feb. 2020].
- Nytimes.com. (2020). Stock Market Continues to Plummet in Worst Week Since 2008: Live Updates. [online] Available at: https://www.nytimes.com [Accessed 28 Feb. 2020].
- Soper, S. (2020). Amazon merchants curb ad spending and hike prices as coronavirus threatens orders. [online] independent. Available at: https://www.independent.ie [Accessed 28 Feb. 2020].
