What can Amazon do for you?
Economists and industry experts – and the data – agree on little when it comes to holiday sales.
In December, a mere ten days after the National Retail Federation proclaimed that a record 190 million consumers shopped over the five days from Thanksgiving through Cyber Monday – up 14 percent from a year ago – the U.S. Commerce Department announced retail sales grew just 0.2 percent from October to November, well below the 0.5 percent increase that had been projected by economists polled by Reuters. (That growth was revised upward slightly, to 0.3 percent, by the Commerce Department in its December 2019 Advance Monthly Sales for Retail and Food Services report, released on January 16.)
Depending on whom you ask, brick and mortar is either suffering (Moody’s Investors Service said earlier in December that it expected department stores to record a 20% operating income decline for 2019, and the likes of Target, Kohls, J.C. Penney and Macy’s each reported a decline in sales for the holiday period), or, well, it’s not: Dollar General recently announced plans to open more than 1,000 new stores in 2020.
For its part, the Commerce Department says that retail sales increased by 0.3 percent from November to December of 2019, and by 5.8 percent compared with December of last year, buoyed no doubt by stronger economic prospects and an easing of trade tensions with China and others that weighed on holiday sales a year ago.
Numbers aside, there is little dispute on the company most often associated with the disruption of the retail sector. This holiday season, Amazon has doubled (tripled? quadrupled?) down on logistics, pouring millions of dollars into an expansion of its one-day delivery service, to which the company attributed a 16 percent quarterly decline in operating income in October (marking its first such decline in two years). The shipping giant spends approximately $40 billion annually on shipping costs.
On the company’s third-quarter earnings call, CFO Brian Olsavsky, stating, perhaps, the obvious, said: “I think One Day should help with holiday shipping.”
To wit: Amazon said it hired 200,000 employees for the holiday rush, more than UPS (100,000) and FedEx (55,000) combined. It reportedly has a fleet of 20,000 tractor-trailers, double what the company had on the road during the peak of the 2018 holiday season, enabling it to handle more than 40 percent of its last-mile deliveries.
Amazon’s strategy appears to be borne out by the early results: of the 189.6 million Thanksgiving weekend shoppers, 142.2 million shopped online. Said the National Retail Federation: “With online and in-store shopping increasingly intermingled, free shipping was the biggest reason for shoppers to make a purchase they were otherwise hesitant about, cited by 49 percent, up from 42 percent last year.”
Touché, Mr. Bezos. Touché.