Prime Numbers

Coronavirus economics could tilt the scales in favor of Amazon — permanently

As people are staying home to help prevent the spread of the coronavirus, Amazon is seeing an increase in demand as small businesses suffer.


As Americans try to stay home to help prevent the coronavirus from spreading further, Amazon is seeing a lot more demand from listless shoppers who don't want to go out if they don't have to and have time to kill.

While Amazon is seeing an increase in demand, small businesses around the country are being forced to close indefinitely or are seeing far fewer customers, and business owners are worried about if this emergency could bankrupt them. Amazon was already driving down demand for many of these businesses, and this pandemic could permanently tilt the scales in Amazon's favor.

Amazon announced on this week that it will hire 100,000 new workers to help meet the demand its currently seeing. The company will also be increasing wages for its workers.

"In addition to the additional 100,000 new roles we’re creating, we want to recognize our employees who are playing an essential role for people at a time when many of the services that might normally be there to support them are closed," the company wrote. "In the U.S., we will be adding an additional $2 USD per hour worked through April from our current rate of $15/hour or more, depending on the region."

It was also reported on this week that Amazon will stop receiving shipments of anything but medical and household goods until April 5, so there is enough supply available to meet people's needs. That doesn't mean you can't buy other types of products, it just means many products may go out of stock temporarily.

While Amazon starts hiring new people and making changes to its operations, a lot of people are already suffering from financial setbacks. A new poll finds roughly 1 in 5 American workers have already seen their hours reduced or lost a job since the coronavirus hit the United States. Retailers around the country, from REI to Nordstrom, are temporarily closing down while the coronavirus spreads. Thousands of small businesses have also closed around the country.

Business experts often describe something they call the "Amazon effect" to explain the shift from people going to brick and mortar stores to them shopping online, and many have attributed the deaths of companies like Sears, Toys "R" Us and Borders to Amazon's dominance. Considering Amazon has already had a major impact on how much business these types of brick and mortar stores receive, a situation where people are being forced to avoid going shopping and have to instead shop online could mean Amazon will expand its presence in retail even further and many companies could cease to exist.

We do not yet know how long these types of businesses will need to stay closed. That will depend on how long it takes for us to get the pandemic contained and produce the necessary pharmaceuticals to help people stay healthy or fully recover if they've been infected. The longer people have to rely on online shopping, the worse it's going to be for many of these businesses.

It's also important to note that once people get used to shopping on Amazon a lot, they tend to keep doing it. Some people even become addicted to online shopping. People might be building up a habit of shopping on Amazon during this pandemic that could remain long after this is over.

The Trump administration is currently talking about the possibility of making $250 billion dollars in loans available to small businesses, which could help a lot of businesses survive this. However, not too many details have been released, so it's unclear what the effect would be. The administration says it's also considering mailing checks to individuals to help people get through this crisis, which would help those who are missing work right now.

See also: Could Climate Change Benefit Companies Like Amazon?

We don't know if Amazon will keep these new employees after things go back to normal. Amazon did not respond to a request for comment before this article was published. Will those 100,000 people suddenly be out of work? Will the companies that many were working for that had to close reopen when this is over? All of this remains to be seen, but it seems safe to say Amazon is currently in a position to make major gains at a time when most are suffering major losses.

The Inverse analysis

It's not Amazon's fault that it stands to benefit from this public health emergency, but it sure looks like the company will see some benefits. It's good that the company is raising wages and helping people stay employed, but it seems quite possible many of those people will be out of work when this crisis has come to an end. Unless the Trump administration acts boldly to save small businesses and help those who are already out of work or may soon be out of work, the economic impacts of this pandemic could be massive, and a lot of people could end up struggling just to get by.

Related Tags