While COVID-19 pandemic was a terrible tragedy, Amazon.com (AMZN 1.63%), as perhaps the most essential business in the world during this time, had a terrific year in 2020. Sales accelerated 38%, and operating income rocketed 57% higher-- an incredible feat for a business of Amazon's size, and especially impressive when you consider all of the COVID-19 mitigation spending Amazon had to make during the year.
However, the stock is actually down about 16% from all-time highs set last summer. Investors obviously think that as the economy reopens, Amazon's sales could decelerate mightily. These days, investment dollars are also flowing to "reopening" trades.
That may prove a winning trade in the near term; however, investors may also be underestimating Amazon's growth potential beyond the pandemic. That's because that with the necessity of ordering food and goods online in 2020, Amazon picked up three new types of customers. Having tried out Amazon last year for the first time, these new customer cohorts may just stick with the customer-obsessed Amazon post-pandemic, too.
Group 1: Boomers
It's no surprise that the COVID-19 pandemic could mark a sea change in the ways older people shop. Not only are seniors more susceptible to severe or deadly cases of COVID-19, but they were also the most unlikely to shop online pre-pandemic. As many of us with older parents and grandparents can probably attest, there's usually some resistance to learning a new technology, even using a computer or smartphone, let alone navigating an online shopping app.
However, the pandemic has forced many baby-boomer hands. According to NPD Group, customers 65 and older bought 49% more online from January through October, making seniors the fastest-growing cohort of online shoppers in 2020. Moreover, older Americans tend to have more disposable income than younger adults. According to the AARP, adults over 50 accounted for 56% of all U.S. spending in 2018.
This January article from The Washington Post outlines several anecdotal stories about seniors who finally shopped online, and, realizing its incredible convenience, will likely continue doing so post-pandemic.
It wouldn't be a surprise if many seniors, especially those who may have trouble getting around and driving, join their children and grandchildren in their Amazon addiction.
Group 2: Italians
The pandemic may have also forced the hand of countries and geographies that have been slow to embrace Amazon and online shopping. The most glaring example is Italy, where Amazon has been for 10 years but never really caught on in the way it did in America, or even other developed European nations.
There are a number of things working against Amazon in Italy; for one, it has one of the oldest populations in Europe. Second, Italy prides itself on its small businesses, shop owners, and artisans, is and somewhat resistant to change, let alone corporate mass-market behemoths like Amazon.
Before the pandemic, only 40% of Italy's population shopped online, compared with 87% in Britain and 79% in Germany. However, that number jumped to 75% during the pandemic, and overall online sales are set to grow 26% in 2020, according to researchers in Milan.
The jury is still out on whether Amazon's gains will be sustainable in Italy over the resistance from many that defend its culture; however, the company plans to open two new fulfillment centers in the country amid positive 2020 momentum.
International markets have been somewhat of a laggard for Amazon. Its entire international segment is smaller than the North American business, was growing slower prior to the pandemic, and was less profitable. However, 2020 could be a positive turning point: Last year, international revenue grew 39.7% -- even faster than the North American segment at 38.4% -- accelerating over the measly 13% growth in 2019, and even turning a slight operating profit for the first time ever.
Could this be the beginning of better international performance for Amazon? Time will well.
Group 3: Work-from-homers
Finally, the COVID-19 pandemic changed everything about the way we work. Companies have dabbled with remote work for a while, but most large corporations have still usually insisted that workers come into the office. That all changed with COVID, as an estimated 42% of U.S. full-time workers worked from home in 2020, according to Stanford University. While that trend will reverse somewhat as the economy reopens, some remote work will likely stick around.
Especially if workers have anything to say about it. According to a recent online survey by resume and job consulting service LiveCareer, 29% of workers said they would quit their jobs if forced to go back into the office. Yes, apparently, if you can work with just a computer and a phone, you really don't enjoy wasting hours a day in traffic or on the subway!
And according to another new study by Harvard Business School professors, an estimated 16% of workers that were previously working in offices full-time will permanently switch to working from home at least two days a week. And one-third of surveyed firms that switched to remote work during the pandemic said that remote work will remain common at their companies. Moreover, most of the jobs that can be done remotely tend to be better-paying white collar jobs that require more education.
This all adds up to a significant part of the working population working from home more post-pandemic. That should favor more online shopping for items that may have otherwise been picked up on the way to or from work in the past. Combined with the fact these workers tend to be well-paid, and that's a recipe for more dollars flowing to Amazon, even post-crisis.
The jury's out, but don't count out Amazon post-pandemic
It's pretty likely Amazon won't grow another 38% in 2021 as people get vaccinated and the economy reopens. However, it's also possible that Amazon's acquisition of new customers among seniors, international markets, and work-from-homers could expand its overall customer base permanently, helping it sustain a better growth rate than investors may expect. 16% off its highs, Amazon's stock is starting to look attractive once