Amazon's Strike in Germany Extended Till Christmas Eve - Analyst Blog

Amazon.com Inc. (AMZN) will continue to face a strike by its German employees, demanding higher pay and a better work environment, until the Christmas Eve.

Reportedly, German labor union – Verdi – called a strike at four major distribution warehouses in the country — Bad Hersfeld, Leipzig, Graben and Rheinberg — and would continue till the afternoon of Christmas Eve if their demands are not met. Amazon operates nine distribution centers in Germany. Last week, Verdi stated that given the special offers during the holiday season have increased the order volumes, putting greater work pressure on employees.

Amazon's German workers have been holding strikes at a number of distribution centers since 2013. The demands of these workers include the right for collective bargaining, proper working conditions and regard for their efforts. However, Amazon claims that the current wages are above-average in the logistics industry.

Germany is Amazon's biggest European market, with sales reaching more than €10.5 billion in 2013 and employing almost 10,000 warehouse personnel. Though Amazon assured that the strikes will not affect deliveries, the current strike could be a matter of concern. Christmas is the peak shopping period and any strike during this time could impact Amazon's sales and profits. Last year, Amazon's orders in Germany peaked on Dec 15, with customers buying 4.6 million items.

To counter the increasing problems in Germany, the world's largest online retailer had earlier announced its plan to open two fulfillment centers in the Czech Republic by 2014-end to cater to the increasing demand across Europe.

Fulfillment centers are giant warehouses that help Amazon and other online retailers to store products, ship them and handle returns quickly. These are important for providing the level of service that Amazon's customers have come to expect from it. Also, the growing demand for online shopping has made it necessary to invest in these warehouses.

Accurate delivery of products is very important for the success of an online retail company and these strikes delay deliveries resulting in losses.

Stocks to Consider

Currently, Amazon has a Zacks Rank #3 (Hold). Some stocks that have been performing well and are worth a look include Stamps.com Inc. (STMP), Geeknet, Inc. (GKNT) and Mercadolibre, Inc. (MELI). While Stamps.com sports a Zacks Rank #1 (Strong Buy), Mercadolibre and Geeknet have a Zacks Rank #2 (Buy).

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