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Here's Why Amazon's Most Important Number Right Now Could Be 1.3 Million

By Parkev Tatevosian, CFA – Oct 1, 2021 at 9:07AM

Key Points

  • Amazon increased its total workers by 52% from the same quarter last year.
  • The company is having better success at hiring and retaining workers.
  • The coronavirus pandemic increases health risks for many jobs.

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Heading into the holiday season, labor policy can be a competitive advantage.

E-commerce giant Amazon (AMZN -1.44%) is no stranger to big numbers. In its fiscal year 2020, the company made $386 billion in revenue, earned $22.9 billion in operating profit, and increased its earnings per share by 82%.

However, in fiscal 2021, another number is taking center stage: 1.3 million. That's the number of employees Amazon has heading into the holiday shopping season. What follows is a closer look at why that could be Amazon's most important number right now.

A delivery person making a delivery.

Image source: Getty Images.

Labor shortages result from higher on-the-job risks

It's no secret that businesses worldwide are having a hard time filling jobs. Folks can observe this fact for themselves on a typical day away from home. Visit a local restaurant, retail market, or coffee shop, and you are likely to see understaffed businesses. The cause of this shortage is no secret either. The coronavirus pandemic instantly made many jobs much riskier endeavors.

Meanwhile, average pay for workers has barely risen. Sure, some companies have raised wages by a few dollars per hour, but is that enough to compensate for the higher on-the-job risk associated with the ongoing pandemic? Labor shortages are evidence that it's not. 

Some businesses are less affected than others. For instance, Macy's reported increasing profits by operating its stores with fewer people, saving on wages. Importantly, Macy's rarely loses sales because of temporary staff as its stores don't attract as many customers. Sure, the customer experience would deteriorate and may negatively impact the business in the long run, but there was little short-term effect.

That would be in stark contrast to Amazon, which would miss out on sales if it did not sufficiently staff its business. If Amazon does not have the staff to manage the logistics of ensuring that enough product is in its inventory, it could show up out-of-stock when consumers visit the website, resulting in a lost sale. If Amazon is short-staffed and it results in slower delivery times, it could also result in disgruntled customers who decide a Prime membership may not be worth the subscription cost.

Therefore, it is essential for Amazon to have enough workers to fulfill customer demand. It is impressive that the company increased its employee total by 52% from last year to reach 1.3 million workers. The company appears to be offering the right mix of pay and incentives to attract people to work at Amazon. It already has more employees than it did for the holiday season last year and, on Sept. 14, said it was looking to add another 125,000 workers in fulfillment and transportation.

Amazon could benefit from competitors' woes

It seems likely that labor shortages will persist as long as the coronavirus pandemic continues. With less than two months remaining until the holiday shopping season gets underway, many businesses are likely to lose sales because they will not have the capacity to fulfill customer demand. The trend could bode well for Amazon, which has had more success in hiring and keeping workers. 

Investors should look for Amazon to outperform competitors during the holidays as its 1.3 million workers help ensure warehouse shelves are stocked and consumers get their items on time. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Parkev Tatevosian owns shares of Amazon and Macy's. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned Stock Quote
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$23.46 (1.21%) $0.28

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