The Covid-19 pandemic had adverse effects on all businesses and business-related activities. Amazon had to improvise quickly to suit the situation and cater to the requirements.
The pandemic affected so many components of the E-Commerce giant. The list includes supply-chain, inventory, logistics, and warehouse management. When almost all other markets were falling and failing to cope with the lockdowns, Amazon was able to perform even better.
In 2021, Amazon’s net revenue was 7778 million U.S. dollars. It recorded a whopping 386.06 billion U.S. dollars in revenue in 2020. It showed a 105.54 billion U.S. dollar spike in revenue from 2019. You can refer to more detailed revenue measures here at Amazon statistics.
How did they cope with the pressure of timely delivery and Amazon FBA? Let us find out how Amazon amassed high profits despite the limitations.
Growth in Ad sales.
Amazon creates revenue by displaying ads in many different places. You can see that a lot of profit comes from displaying ads for other companies registered on Amazon. Amazon ad services have made a higher profit margin with the high surge of online shopping during the pandemic.
Amazon stated that Ad and other sales rose to 6.9 billion U.S. dollars. This is more than the projected total of 6.3 billion U.S. dollars. You will see that the number of sellers onboarding Amazon every year will increase.
Along with that, the Ad revenue will also keep growing. Brian T. Olsavsky, the CFO of Amazon, stated that the Ad services play the role of a “flywheel” that will increase the momentum in the overall growth of the organization. If you are an Amazon seller, and Amazon PPC consultant can help you scale your business.
Increased Volume of Online sales
Through the pandemic, Amazon has thrived incredibly. You can see that the increased number of orders has assisted Amazon to come up with a strategy to work more efficiently. It has driven the warehouses to function almost to their capacity.
This, in turn, has increased the items sold on Amazon by 44%. The fulfillment costs only went up by 31 percent. The increase in online users during the pandemic period of “stay at home and stay safe” has skyrocketed the reach and demand for their services.
This is a habit change caused by the pandemic. It has indeed influenced the individual to choose the comfortable option of online shopping, which is good news for Amazon sellers.
Demand – Challenges and Solutions
How was Amazon going to solve the issue of addressing these high-volume orders? What would be the solution? Amidst the pandemic, when the U.S. was facing an imminent economic crash, and high unemployment rates, Amazon hired new individuals.
The result, as you can see, was 175,000 new employees. These individuals were then assigned roles at the warehouses and delivery sections.
These individuals were able to help the sellers reach their customers, and hence Amazon was able to fulfill the immense demand. You can see that Amazon improvised its strategy at the right point to support Amazon FBA and other functions.
Sellers took advantage of the Amazon PPC strategy that helped themselves grow. Toilet Paper sales increased by 186 percent, and cough and cold medicines by 862 percent.
By aligning to the requirements and taking the necessary decisions to keep the functions running, Amazon made massive profits through the pandemic. With shops closed and no other ways to purchase items physically, Amazon was at the pinnacle of power to resolve the situation.
With the sudden shift of North American trends toward online shopping, Amazon saw itself nearly at a 200 percent profit margin. With the help of Amazon FBA, ad services, AWS (Amazon web services), and other verticals have helped Amazon scale vertically even in the worst of situations.
Even though COVID-19 wreaked havoc on a lot of companies, it boosted the growth of Amazon. The Amazon FBA model helped new sellers tap into a sector that flourished in between the pandemic. It also allowed accomplished sellers to increase their profits and take advantage of the oncoming demand for necessary items.
Amazon also stocked up its warehouses with the required commodities. This helped sellers and customers to have their goals met. They also took on a strict policy for safety while providing an opportunity for sellers to hit high goals. Amazon was able to track and pause the functions of 4000+ sellers who might have not complied with the safety regulations.
Amazon continues to grow as the biggest force in the e-commerce sector. They have implemented the best strategies to grow through the pandemic. In the coming years, it is expected that Amazon will soar to new heights and support sellers and customers as they continue their upward trajectory.
Arishekar N is the Senior Director of Marketing and Growth at SellerApp, an e-commerce data analytics solution. He is responsible for overseeing the development and implementation of marketing strategies, as well as increasing process efficiency by executing cutting-edge Search Engine Optimization strategies at SellerApp
Arishekar has over 10 years of experience in marketing analytics and SEO. He has worked as a Digital Specialist for the tech giant IBM and most recently as the Senior Marketing Specialist for ZioTive Technologies where he enhanced their site structure by increasing website and mobile usability. Previously, he worked as a Senior SEO Analyst for Star Group where he was responsible for managing SEO Audits and analytics.