We all know Amazon.com (AMZN +0.55%) is beloved for its wide selection of products, low prices, fast shipping, and customer service. But it's really popular right now because of the COVID-19 coronavirus.
What's happening
Dave Clark, Amazon's senior vice president for worldwide operations, published a blog post on Monday that discussed how the company is seeing a massive surge in customer demand related to the coronavirus pandemic. As more Americans remain at home, they are spending more online. And the largest single beneficiary of online spending is, of course, Amazon.
As a result, the company is hiring 100,000 more workers to help meet that demand. These jobs are full-time or part-time and are in the company's fulfillment centers or delivery network. Clark even wrote that those who've lost jobs in areas like hospitality, restaurants, and travel can work for Amazon "until things return to normal and their past employer is able to bring them back." That's an extraordinarily attractive pitch to those who find themselves out of work right now.
Image source: Amazon.
On top of that, these jobs pay $15 per hour in the U.S., and Amazon is boosting that to $17 through at least the end of April. That's more than twice the federal minimum wage of $7.25 per hour. The $2 pay raise in the U.S., and similar amounts elsewhere, represents a $350 million additional investment that Amazon is making in its workers in the U.S., Canada, and Europe.
Why it matters
Whenever a company is hiring aggressively, it's a good bet that its management is very confident the company is going to earn an attractive return on those new employees. That means sales growth is going to accelerate given the surge in demand. To put into context what hiring 100,000 extra employees means, Amazon also announced it was hiring 100,000 extra seasonal employees ahead of the 2018 holiday season. That suggests Amazon may be seeing a surge in demand not unlike the run-up to Christmas. Needless to say, that's a serious amount of demand.
Furthermore, consider that despite the long-term trend toward online shopping, e-commerce still makes up only 11% of overall U.S. retail sales. That means 89% of our spending still happens offline. But today, most of us aren't leaving the house, and when we do, it's only for quick trips for basic necessities like food and medicine. So there is a huge amount of our spending that normally happens offline that just isn't happening right now. While it is unlikely all of that spending will migrate online and to Amazon, it's a very good bet that a portion will.
What now?
During times like these, its beneficial to own businesses that can not only survive, but thrive. Amazon appears to be thriving because so many more of us are housebound and reluctant to visit the stores we normally frequent. At the same time, at $1,800 per share, Amazon stock is down about 17% from its recent high.
While the shares of many other companies are down far more and may appear more tempting to bargain hunters, most of those businesses are being seriously hurt by the current environment and therefore deserve to have their shares trade lower to some extent. In contrast, investors should find the current discount on Amazon more attractive than those other opportunities, since its business is actually improving.
