How mighty will Amazon be after the pandemic?

It’s someone’s nightmare job: Amazon boss Jeff Bezos’s newspaper, the Washington Post, is seeking a special correspondent just to cover the billionaire’s online shopping and web services titan.

Having your own chronicler could be seen as the ultimate in billionaire egotism, but we are all close Amazon watchers now.

The group’s tentacles have spread into so many areas of our lives that it is almost impossible to escape – from its cloud storage technology that supports government services and numerous businesses, to its Prime subscription service tying clients into an “ecosystem” that ranges from film and music to shopping deliveries, to the Alexa-driven smart speakers that turn on lights and radios in many homes and search the internet while logging intimate user data.

Covid-19 may have knocked the sales and profits of many businesses, but Amazon was a standout pandemic winner, notching up millions of new recruits who turned to online streaming and shopping while shielding at home.

In Britain, 56% of households are now thought to have had access to Prime Video after almost 700,000 more people signed up in the final quarter of last year, according to analysts at Kantar.

On Thursday, Amazon will reveal the extent to which it has been able to hold on to those new customers as high streets reopened while the costs and complexities of serving shoppers increased.

Widespread supply chain hold-ups, with some factories shut during Covid scares and shipping routes disrupted, are expected to have affected its ability to obtain and deliver products. The cost of delivering has also gone up, as Amazon has had to battle for staff and invest in additional logistical kit amid a global surge in demand for home deliveries. In the UK, it increased pay for warehouse workers and offered signing-on bonuses of up to £3,000 before Christmas to attract staff, as well as offering more than £11 an hour in some parts of the country – three pounds more than the current minimum wage.

Meanwhile, shoppers now have more chance to try clothes on in boutiques, go on holiday or venture out to bars and clubs – meaning less cash to splash on Amazon.

Such problems have already hit the share prices of tech companies, from online fashion sellers Asos and Boohoo to streaming service Netflix.

At Amazon, difficulties prompted a disappointing performance in the three months to the end of September when the company reported its biggest year-on-year profits decline since 2017. Another fall is expected for the Christmas quarter.

Overall, analysts expect fourth-quarter revenues of $137.7bn (£102.8bn) and operating profits of $2.6bn: a 9%-plus increase in revenues on the same period a year before, but a chunky 60% fall in quarterly profit.

Costly investments in chartering cargo ships and leasing planes are expected to have given Amazon a degree of protection from the global supply chain issues. However, almost a third of its packages are delivered by partner companies.

Michael Pachter, an analyst at Wedbush, says: “Industry-wide shortages in shipping containers, truck drivers, and readily available ports likely impacted delivery times and caused strain for many orders as shipping container [rates] surged from under $2,000 before the pandemic to over $20,000 with multi-week delays.”

On the demand side, it is not plain sailing either. In groceries, for example, Natalie Berg, a retail analyst and co-author of a book on Amazon, says: “All the things that made Amazon unique, such as same-day delivery and checkout-free stores, are quite quickly becoming the norm.”

In the booming world of fast-track groceries, the likes of Getir, Gopuff and Gorillas promise to deliver in less than 15 minutes, and are battling with Amazon partner Deliveroo and its rivals Just Eat and Uber Eats, as well as Tesco’s own Whoosh and Sainsbury’s Chop Chop in the UK.

Meanwhile, Amazon has opened about 15 of its “just walk out” till-less grocery stores in the UK, but it is already facing a challenge in this area from Tesco and Aldi – and plenty of competition from regular local convenience stores. A tie-up with Sainsbury’s, which is using Amazon technology to power its just-walk-out store, may suggest a more lucrative way forward.

Don’t be surprised if Amazon brings hi-tech physical fashion stores to the UK before long too. If shoppers are keen, the tech giant’s real assault on the high street will be via partnering with more familiar brands with better fashion credentials.

All of this will fuel the appetite to take on the dominance of big tech firms. In the US, a change of regime is being led by Lina Khan, the new boss of the Federal Trade Commission, who made her name helping guide investigations into monopoly tech power, particularly Amazon.

Historically, taking on monopoly businesses has been a slow and arduous process. But Khan showed her ambition in the first meeting she chaired last summer, saying the US needed “a different set of rules” to control big tech.

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