This holiday shopping season is shaping up to be unlike any other we’ve seen. First of all, it’s already well underway. Retailers have kicked off a full month of Black Friday deals instead of waiting until the actual Black Friday. And of course, job losses and the ongoing coronavirus crisis are hurting many consumers’ wallets and morale. Amid this unusual holiday shopping environment, Amazon (NASDAQ:AMZN) is heading into the season in a position of strength.
While many retailers suffered during the early stages of the health crisis, this online retail giant flourished. Amazon benefited as consumers stocked up on essentials and shopped online. The company saw such demand that its biggest challenge was fulfilling orders. Amazon mostly succeeded in meeting that challenge. And in the most recent quarter, Amazon said net sales climbed 37% year over year to $96 billion and net income tripled to $6.3 billion. This won’t be the jolliest of holidays for everyone, but for Amazon, it might be the one that generates the most sales. Let’s take a closer look at what will drive these gains in the coming weeks.
Economic woes mean that overall retail sales may suffer this year. Many people lost jobs during the early days of the coronavirus pandemic. The U.S. unemployment rate in October was 6.9%. That’s compared to 3.5% in February. Others worry about job security as the crisis hurts their employers’ businesses. Retail sales this season may only climb a meager 1% to 1.5% from the year-earlier period, according to the 2020 Deloitte holiday retail survey.
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Bright outlook for e-commerce
While overall sales may be nothing to cheer about, the outlook for e-commerce is much brighter. Sure, most Americans are not facing official stay-at-home orders at the moment. But people continue to limit contact with others as the coronavirus health crisis continues. And that’s likely to lift online shopping. E-commerce sales will climb between 25% and 35% year over year during the holiday shopping season, the Deloitte research predicted. That’s compared to a 14% gain during the same period last year. Holiday e-commerce sales may total as much as $196 billion, according to the report.
Amazon has a good chance of capturing many of these purchases. It is the world’s most-visited retail website, as measured by unique visitors during the month of June, Statista data show. Shoppers who were satisfied by Amazon’s ability to deliver through the worst days of the crisis may now trust the retailer with their holiday orders as well. And the advantages of Prime membership, such as free same-day or one-day delivery, may be another incentive. So, if you’re a Prime member and you’re watching your budget this year, chances are you’ll favor Amazon when making your holiday purchases.
Amazon also is offering new options for contactless delivery — a plus, considering the health crisis. The retailer this month expanded its in-garage delivery service to “tens of millions” of Prime members in more than 4,000 U.S. cities. This was previously available in 50 cities. Through the service, Amazon delivery workers leave packages right inside the member’s garage. A special app notifies the member once delivery is complete.
Beyond the U.S., Amazon may also see an increase in sales due to lockdowns. In France and England, for example, all non-essential shops are closed for the month of November. Coronavirus cases have been surging in both countries, prompting the move. Consumers who like to get an early start on holiday shopping may turn to Amazon rather than wait and see whether governments will reopen shops at the start of December. To make shopping right now even more tempting, Amazon’s UK website also is advertising early Black Friday deals.
So, Amazon’s track record this year, the outlook for holiday e-commerce, and international lockdowns all support the idea of a sales win for this retail giant. That should trickle down to stronger earnings for the company as well. If you plan on doing some holiday stocks shopping, Amazon should probably be on your list.