The coronavirus pandemic has many people and companies acting in unusual ways, and the world's largest e-commerce company is no exception. In a move that turns capitalism on its head, Amazon.com Inc. has begun discouraging users from buying things they don't need.
Amazon is suppressing extraneous consumption in various ways, according to a report in The Wall Street Journal. It isn't planning its normal promotions. It's not telling shoppers what other customers bought. It has even delayed Prime Day indefinitely. The retail giant is overwhelmed with orders of the essentials it has prioritized fulfilling. It doesn't need to persuade customers to upgrade their TVs right now.
Of course, Amazon turning down the dials on its shopping machine is a reminder of how much control it has over the behavior of its users in the first place. The company's algorithms are always nudging customers this way or that. In normal times, it might direct a buyer to a higher-priced product if they seem like the type of person willing to overspend, or it could keep pushing them to pull the trigger on that espresso machine they had been thinking about buying.
It's not just Amazon. Other companies are easing up on that most fundamental form of online manipulation -- targeted advertising -- as they slash their marketing budgets. Expedia Group Inc. Chairman Barry Diller says the company normally spends $5 billion on advertising in a year but probably won't even hit $1 billion this year. The overall travel industry has been cutting back sharply on advertising, but the economic trends are similar in other industries. This will make ads cheaper, while also leading to less money flowing through the system. Perhaps the most telling sign of hard it will be for the advertising industry is that Google is going to try to cool it on hiring."
This won't last forever. Eventually it will be time to turn the economy back on, and the infrastructure of internet-fueled consumption will be right there to help. "What is about to be unleashed on American society will be the greatest campaign ever created to get you to feel normal again," as Julio Vincent Gambuto, a writer and director, wrote on Medium last week.
Amazon, whose stock price is up over 40% since hitting a low on March 12, may turn the spigots back on earlier than companies facing deeper crises. Once it gets its supply chain back in order, it will return to natural state of being.
Amazon might be dialing back consumerism, but big companies are still getting ready to sell the latest whizbangs. Earlier this week Apple announced its iPhone SE, a phone seemingly designed for the grim economy. It has a $399 price tag, fingerprint reader and all. The over-the-ear wireless headphones could have interchangeable magnetic components.
But meanwhile, Amazon has struggled to respond to a surge in orders it can't fill and tried to tamp down demand.
Exploding Kittens, a game that bills itself as "a kitty-powered version of Russian roulette," spent years ranked as one of the most popular card games on Amazon's store. When the coronavirus pandemic hit, sales doubled week after week, as families looked for distraction while hunkering down.
But just as orders came flying in, Amazon began prioritizing products like toilet paper and hand sanitizer. The retailer stopped ordering more supply of Exploding Kittens, and the most popular version of the game soon fell out of stock. Tens of thousands of customers a day were searching for the product but couldn't buy it.
Amazon has had to adjust to demand growth in one month that usually would take months or years to develop, said Guru Hariharan, chief executive officer of CommerceIQ, which advises large consumer brands with their Amazon business.
"It is almost like a run on the bank," he said, "when there is a rumor you can't get your money out and everyone runs to the ATM."
Information for this article was contributed by Eric Newcomer of Bloomberg News and by Karen Weise of The New York Times.
Business on 04/18/2020