Amazon has come under fire for price gouging in the week leading up to Hurricane Irma. As the Category 5 storm drew near to the Florida coast, basic emergency supplies such as cases of bottled water surged 500 to 625 percent in price, from $4 to $8 per case to more than $20 per case. Oh, and expedited shipping to Florida was being quoted at close to $200.
According to Forbes, Amazon blamed the surge pricing on two factors which it said were not immediately within its control.
First, the company pointed to third-party sellers, whose prices are typically higher (and not set by Amazon). As the regularly-priced goods sold out, said Amazon, only the higher-priced alternatives remained. Indeed, there are sellers listing cases of water at those prices on a regular basis — it’s just that the average shopper never sees them.
Second, Amazon pointed to its algorithm, which is designed to adapt supply based upon consumer demand — a process known as “dynamic pricing.” This works well in the holiday season when many people are trying to purchase the same non-essential items like toys or consumer electronics.
However, the algorithm doesn’t know the difference between Hanukkah and a hurricane, nor does it differentiate between a Hatchimals craze (see: Christmas 2016) and supplies necessary for weathering a severe natural disaster.
It’s not so much that Amazon jacked up the prices — which, again, are set by the sellers — but rather, that it allowed them to skyrocket in the lead up to a public crisis like Hurricane Irma.
On Thursday, an Amazon spokesperson told Forbes the company does not engage in surge pricing, nor does it allow product prices to fluctuate based on region or delivery location. The spokesperson said Amazon is now actively monitoring the website to remove offers that “substantially exceed the recent average sales price” for survival staples like water.
Headquarters 2.0
Amazon reportedly plans to build a second headquarters somewhere else in North America. The facility would employ 50,000 professionals, all making six-figure salaries. Start the bidding war!
Forbes reported the eCommerce giant expects to outgrow what its Seattle headquarters can support. High housing prices, congested infrastructure and long commutes were some factors that have driven Amazon to look for a second home base. So far, however, the candidates (including Toronto, Boston, Washington, Atlanta, Dallas and Denver) seem to suffer from the same shortcomings.
CNBC notes cities and states love tech companies because of the jobs they create and the overall economic boost they can give to a region. Therefore, cities and states are willing to offer ridiculous terms and benefits, including massive tax breaks.
Many are saying the move by Amazon is just a marketing ploy to attract bigger, better bids so the company can build a big office in another city and reap those tax breaks. “Headquarters” isn’t even an accurate descriptor, according to some, as the executive team will mostly remain in the company’s existing Seattle headquarters.
If it’s a marketing ploy, it’s working: More than a dozen cities are already vying to become Amazon’s home away from home. And, if anyone can pull it off, Amazon, with its independent business units and decentralized culture, may be the one to do it, CNBC concluded.
Forbes, however, disagreed, suggesting that operating from dual headquarters was bound to create confusion in terms of making and carrying out decisions.
Prime Now, Eh?
Amazon’s Prime Now, which offers one- and two-hour delivery to members, is slated to roll out to Canada by the end of the 2017 calendar year. Pilot programs delivering groceries and other goods are planned for Vancouver and Toronto starting in November and January, respectively. Prime Now is also available in nine other countries, including Singapore, the U.K. and Japan.
Shares Forecast
With its “bricks and clicks” strategy, Amazon could see stock prices climb as high as $1,300 in the next year to year-and-a-half, one analyst says. The 460 storefronts it gained in the Whole Foods acquisition would have a big hand in that 34 percent upside, he said. All that could stand in its way would be competition from players such as Google and Microsoft, and potentially slow growth at Amazon Web Services (AWS), which the analyst said is the company’s primary profit driver.
Far-Out Forecast
Beyond the potential growth this year, others are saying Amazon could reach a $1.6 trillion valuation within the decade — another number built on the Whole Foods acquisition and AWS growth. That’s assuming a threefold increase within nine years, which is actually conservative, notes MarketWatch, considering Amazon exploded by 900 percent over the previous nine-year span.
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