Amazon to pay billions to prevent Christmas shortages

Amazon has said it will spend several billion dollars to manage labour shortages and supply chain issues in the run-up to Christmas.

The online retail giant said it was doing “whatever it takes to minimise the impact” on customers and sellers.

Meanwhile, Apple said a shortage of semiconductor chips had cost it $6bn (£4.35bn) in lost sales.

The tech giant’s boss, Tim Cook, admitted its problems would persist over the festive period.

While the technology giant said fourth-quarter sales rose 29% to $83.4bn, they fell short of expectations. Profit rose to $20.5bn from $12.6bn.

Mr Cook said it had experienced “larger-than-expected supply constraints” in the three months to 25 September and the chip shortage was now affecting “most of our products”.

Amazon said it would have to spend a significant amount of money to manage its own shortages.

Chief executive Andy Jassy said Amazon expected to “incur several billion dollars of additional costs” as it managed its way through “labour supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs”.

“It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners,” he added.

Amazon’s profits dropped sharply to $3.2bn from $6.3bn in the third quarter to 30 September, on sales 15% higher at $110.8bn.

George Godber, fund manager at Polar Capital, told the BBC: “It shows that these global giants – and they are just vastly huge businesses – are not immune from the problems that every business is facing.”

Businesses across the world have been grappling with shortages and issues with supply chains as economies have rebooted following coronavirus lockdowns.

A global chip shortage is causing delays on the production lines of many products – including cars, washing machines, and smartphones – because supply has not kept pace with demand.

Surging demand for goods, including those sold by Amazon, has led to increased congestion at ports in many countries, with retailers sounding the alarm bell that deliveries for the holiday season could be delayed.

In California in the US, there have been record-breaking queues of container ships outside major ports.

Staffing shortages
Amazon’s staffing issues has led to the retailer offering one-off payments of up to £3,000 in a bid to attract staff in UK regions where there is high demand for labour.

The firm is hiring for 20,000 positions across its UK network during the festive season amid fears over worker shortages. It also began offering a £1,000 signing-on bonus to recruit permanent staff in some regions in August.

Pay for the temporary roles starts at a minimum of £10 per hour, rising to £11.10 in some parts of the UK.

In the past, Amazon has faced accusations of poor working conditions both in the UK and the US, where it is the country’s second largest employer.

Reuters reported Amazon Chief Financial Officer Brian Olsavsky had said worker shortages contributed to inconsistent staffing levels at the company.

He said staff became its primary capacity constraint in the third quarter, which he added was having an impact on other areas of the business.