With an eventful end to 2021, this is a good opportunity to explore 3 Amazon and supply chain predictions for 2022.
As 2022 approaches, the world will also mark the beginning of the third year of recovery from COVID-19 and its effects. In early 2020, the world was rocked by the outbreak of the pandemic and its spread from Asia all over the world. The challenges of the pandemic for the global economy have been significant; Here are 3 predictions on what things might look like in 2022.
1. Global supply chain
The global economy will likely continue to struggle due to the problems of constant interruptions in the global supply chain. The new omicron variant, which is found to be very contagious because it spreads to record speed, has already placed many countries around the world under travel, work and movement restrictions.
The limitations that omicron has placed on these countries will add another layer of complexity to global supply chain disruptions in the first quarter. It will be compounded by the pressure omicron will put on the workforce itself.
The costs of shipping inventory and supplies globally increased sharply in 2021 and are currently cool off a bit from the surge. Until the appearance of the new omicron variant, it was expected that costs would continue to fall over the year at a moderate rate, however, this forecast is volatile as omicron causes the same type of downtime. and supply chain price spikes to reach this point.
Some of the major strains on the global supply chain that are expected to continue into 2022 are semiconductor supply shortages, shortages in container shipping, and professional labor shortages for carriers and in the industry. seaports. Rising costs of transportation, labor and energy challenge the global supply chain while impacting financial institutions and governments around the world. The reason: Rising costs is another way of describing the next point in our forecast, inflation.
Most of the current generation in the United States does not know the meaning and challenges of inflation. The last era of significant inflation was in the early 80s when Ronald Reagan was president. Many economists describe inflation as a wild beast that is very difficult to tame, capture, and put back into its cage once it breaks loose. Another way to describe inflation is like a pendulum that keeps swinging and increasing costs in one direction, which then increases costs in another direction, in unexpected and disruptive ways, and again and again.
The Federal Reserve has maintained a low interest rate environment for the past decade, and generally during times of inflation, when the prices of everything go up, the Fed should raise interest rates to help people. to get more interest on their savings and to protect the purchasing power of most households. Nevertheless, inflation in 2021 has already crossed the 6% mark, which is about three times the Fed’s usual target of 2% per year. Despite this, the Fed has kept interest rates low and in doing so has yet to apply this key tool of rising interest rates to fight inflation.
It is a bit difficult for many economists and the Fed to try to distinguish between real inflation in the economy or transitory inflation in the economy due to the effects of the pandemic and global supply chain challenges. This could explain why the Fed has focused on keeping the interest rate environment low, as it is more concerned with tackling the pandemic and global supply chain tensions than inflation. real hitting the economy.
It is unclear how long the Fed will be able to maintain its current position if real inflation maintains its momentum and does not slow down. If the effects of global supply challenges and its inflationary triggers seem to subside and real inflation takes its toll, we can expect the Fed to start raising interest rates. The Fed could raise interest rates in the first quarter of the year, or could even extend into the second or third quarters if omicron puts further significant pressure on the U.S. economy.
The global pandemic benefited the e-commerce industry and Amazon, the industry juggernaut, when it erupted in early 2020. It accelerated the adoption of online shopping by many consumers in the United States. United of a few good years, because consumers stranded at home could only buy the products they needed online. Current 2021 Amazon’s financial results continued to grow at a rate of around 18% year on year, but not as dramatically as the 37% YOY rate in 2020.
As the largest online marketplace in the United States, Amazon reflects the American economy very well. It is also strongly affected by disruptions in the global supply chain and inflationary pressures. If such challenges continue to affect Amazon’s market and its stakeholders, 2022 could prove to be the most difficult year yet for Amazon. To add to that, this will be the first full year without its founder, Jeff Bezos, as CEO of the company. Andy Jassy reprized the role on July 5, 2021.
Amazon will face challenges in the years to come from a few main sticking points. The first is the US government that is cracking down Amazon’s perceived market dominance. The U.S. government will continue to challenge Amazon to monitor that corporate power is neither abusive nor destructive to the economy.
Global supply chain disruptions have strained Amazon’s sourcing capabilities as well as many of its third-party sellers in 2021. They have all struggled to keep their products in stock on the platform. form. These supply constraints limit the depth and variety of products on Amazon’s platform that most consumers are familiar with. This trend, in turn, could cause consumers to seek alternatives in other markets if it continues through 2022. One thing is clear about this prediction: Amazon’s third-party sellers will have to learn the art of Amazon trade negotiation to maintain their inventory levels in good condition, while controlling their cost structures.
Another sticking point is how inflation affects the competitiveness of products offered on Amazon. It is important to remember that by the way 60% of Amazon’s market revenue comes from third-party sellers. Most of these third-party sellers are not familiar with or equipped to fight inflation. So, if they increase their prices on the platform during 2022 to keep up with cost inflation and the prices become too expensive compared to other traditional and established retailers, it will affect the ability to ‘Amazon to remain competitive and maintain its growth momentum compared to other competitors.
Signs of weakness and volatility
The world economy is a wonderful and complex system that connects dots and lines in many unexpected ways. In recent decades, this system has brought great prosperity to many countries. However, its complexity during a global pandemic shows signs of weakness and volatility. Looking at the state of global supply, inflation, and Amazon over the past year 2021, we can see how they are all interconnected and influencing each other in various ways.
This interconnectivity will determine much of the direction things take for all of us in 2022. There is no attempt here to predict the future, but an attempt to examine past events and their effects, and to try. assess where it could all go next.
Yoni Mazor is the Director of Growth and co-founder of GETIDA. He started developing GETIDA after successfully operating a $ 20 million a year Amazon business, selling fashion brands internationally. GETIDA is specialized in the analysis and advice of Amazon discrepancies. Using data visibility technology, GETIDA focuses on discovering and managing financial and inventory-related discrepancies with billions of dollars in transactions handled daily. He previously served in Navy Special Intelligence. This expert opinion is exclusive to Broadband Breakfast.
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