Amazon (AMZN -2.12%) is seeing surging demand from customers shopping on its online marketplace, and it's been on a hiring spree in order to keep up with all of the orders. The e-commerce leader added 100,000 new employees over the last month or so, and it plans to add 75,000 more. For reference, Amazon added about 150,000 new employees in all of 2019 and just 82,000 in 2018.
The hiring spree, along with a couple other business decisions from management, including delaying Prime Day and suspending its shipping service for third parties, indicate Amazon has much more demand than it can handle right now.
Here's how that demand might play out over the next few quarters for Amazon.
Image source: Amazon.
Comparing COVID-19 hiring levels to holiday hiring
The rush to add employees to meet surging demand bears some similarities to Amazon's seasonal holiday hiring. Last year, the company hired 200,000 temporary workers to meet demand during the holiday shopping season.
And Amazon needed those workers. "What we saw was essentially very strong holiday performance from the middle of November on," CFO Brian Olsavsky said on the company's fourth-quarter earnings call.
With 175,000 new hires, Amazon could be seeing similar levels of increased purchasing from customers amid the coronavirus pandemic as it did in the fourth quarter. Indeed, consumer spending was up 35% in the last few weeks compared to the same period last year, according to data from Facteus. Based on Amazon's second-quarter results from last year, that puts its current sales pace just below its fourth-quarter results.
But the fourth quarter is seasonally stronger than the other nine months of the year. Amazon typically sees a drop of around 20% in North American sales from the fourth quarter to the first quarter.
So, investors shouldn't be surprised if there's a bit of a hangover in the third quarter. Coupled with a delayed Prime Day, Amazon could see a significant drag on sales this summer. And if a prolonged response to the pandemic results in significant job losses, overall consumer spending could drop. So, the mid-term sales outlook for Amazon isn't quite as bright as the near term.
Where's Amazon hiring?
Amazon is seeing increased demand across the board, so it's placing a lot of new hires in its warehouses and fulfillment centers to help package orders in a timely manner. It's likely also hiring staff to clean its warehouses more thoroughly amid the heightened risk from coronavirus.
Amazon also expects to add thousands of new drivers for its delivery service partners. Amazon's delivery network has been so strained by an influx of orders that it's suspending its Amazon Shipping service in June. That's a sign that Amazon expects to retain a lot of delivery drivers even after the world returns to more normal behavior, potentially shifting a higher percentage of its orders to its own delivery network.
The last place Amazon is hiring is for grocery shoppers. Amazon is working as fast as it can to expand grocery delivery. It now offers delivery from over 150 Whole Foods locations, up from about 80 just a few weeks ago. Amazon also had to start putting new Amazon Grocery shoppers on a digital waitlist while its ability to fulfill orders catches up with demand.
While hiring in warehouses and placing new drivers in its delivery network is similar to its ramp-up in hiring for the holiday season, the step up in grocery shoppers and rapid expansion of Whole Foods stores offering delivery is quite different. It's likely Amazon will have to lay off some of its warehouse workers when demand returns to normal, but it's possible the hiring response to Covid-19 for delivery drivers and Whole Foods shoppers merely accelerated its hiring plans for both parts of its business. And with more than enough demand for both services right now, that's a big long-term win for Amazon.
