The cutthroat jobs strategy Amazon uses to conquer retail
The cutthroat jobs strategy Amazon uses to conquer retail
By Lisa Fickenscher April 25, 2017 | 2:14am
Jonathan and Michele Rhudy recently moved their Richmond,
Va., consulting business into new digs and bought all new stuff — office
supplies, furniture and even a coffee maker.
There was no question in their minds where all of those
items, plus paper clips, reams of paper and every last doodad, would come from:
Amazon.
Jonathan said he discovered the magic of Jeff Bezos’
e-commerce giant almost a decade ago while he and his wife, both busy running
their small business, were raising their three kids and were always running out
of diapers.
“I quickly realized how, being a family of five, we
didn’t have time to go to the store,” he told The Post this week.
The Rhudys’ buying habits mimic those of millions of Americans,
and that surely makes Bezos very happy — not to mention immensely wealthy.
Bezos, who has grown his humble, money-losing online book
shop in 1995 into one of the most powerful economic engines on Earth — selling
everything from airplane parts to zebra-print dresses — saw his net worth grow
alongside his company. This week, he became the world’s second-richest person,
worth $76 billion.
Amazon, which is also in the movie-producing business —
it won an Oscar for its “Manchester by the Sea” — is now the
fourth-most-valuable company in the United States and employs 341,400 full- and
part-time employees.
Amazon will add another 100,000 full-time jobs over the
next 18 months, Bezos proudly announced this year.
The new jobs are great, but a closer inspection shows
Amazon may simply be adding back jobs it helped kill off.
For example, Amazon played a large role in eliminating
more than 50,000 jobs in recent years from just three companies — Staples,
Office Depot and Best Buy, public filings show.
In March, MarketWatch estimated that Amazon will destroy
1.5 million retail jobs in the next five years. And with its push into
self-driving trucks, drone delivery, automated grocery stores and more, the
site said the total number of lost jobs would likely be more than 2 million,
concluding, “Could Amazon actually kill more American jobs than China did? It’s
quite likely.”
In addition to capturing 50 cents of every dollar spent
online, Amazon, according to a report by the Institute for Local Self-Reliance,
a nonprofit research organization, is used for half the online shopping searches
undertaken by US consumers.
In other words, Bezos knows what you want to buy before
you buy it.
Critics are beginning to wonder if Amazon — with such
control over retail sales, jobs, ad dollars and more — is good for America.
One thing is for sure: Bezos isn’t ready to slow down —
he wants Amazon to control even more of Americans’ lifestyles.
A report several weeks ago from Bloomberg revealed that
Amazon has invited executives from companies that make major consumer brands —
like Nike, Oreos and Cheerios — to a meeting in May where the company hopes to
convince them not to sell their products through Walmart and other big-box
retailers.
Bezos wants the brands to be sold direct to consumers
through Amazon.
The company also is spreading its wings deeper into media
with its $50 million deal last week to stream 10 Thursday night NFL games next
season. Bezos paid five times what Twitter paid for the streaming rights in
2016.
There is also chatter that Amazon will soon add
freighters to its retail arsenal, which already includes trucks, plans for
drones and some planes.
Not everyone is scared of Amazon’s growing influence and
power.
“Retail always evolves and reflects society, and right
now, consumers are getting more value for their money,” said Richard
Kestenbaum, a partner in Triangle Capital. “That makes our society stronger and
it forces other retailers to be more creative and competitive.”
But more and more are casting a wary eye on the Seattle
company, whose brown boxes with the “smiling” arrows are ubiquitous.
Critics say Amazon is crushing local jobs and tax bases.
“People need to have jobs to be able to afford online
delivery, and Amazon has knocked out so many private-sector retail jobs and
will knock out public-sector jobs as well,” said Burt Flickinger, managing
director of Strategic Resource Group, a retail consulting firm.
For years, there has been talk about Amazon ruining
better-paying retail jobs and replacing them with lower-paying ones. It has
tried to fight back — but there is still a strong belief that jobs at Bezos’
company don’t pay well.
“This is a company that is so sophisticated in its use of
the web and supply chain, but it adopts this retrograde way of employing
labor,” said Nelson Lichtenstein, director of the Center for the Study of Work,
Labor and Democracy at the University of California Santa Barbara.
Amazon played a large role in eliminating more than
50,000 jobs in recent years from just three companies — Staples, Office Depot
and Best Buy, public filings show.
“Here are these 500 to 800 workers toiling away in a big
warehouse, but many aren’t employed directly by Amazon, and if they have a
complaint, Amazon says, ‘It’s not our problem,’ because they are contract
workers.”
Most of the jobs Amazon creates are low-paying warehouse
and customer-service positions. The warehouse jobs pay, on average, $12.32 an
hour, 9 percent less than the industry average at other warehouses, according
to ILSR, which looked at 1,300 Amazon wage postings on Glassdoor.com.
Recent Amazon ads for customer service reps who work from
home show that the company is paying just $10 an hour or just $2.75 more than
the federal minimum wage.
Although Amazon defends its salaries, touting that
they’re 30 percent higher than what other retailers pay, critics say the
comparison is not apples to apples.
Bezos disagrees.
“These jobs are not just in our Seattle headquarters or
in Silicon Valley — they’re in our customer-service network, fulfillment
centers and other facilities in local communities throughout the country,” he
said in a statement.
But research shows that Amazon’s job gains have come at
the expense of other jobs and that the quality of the Amazon positions is
inferior, with about 40 percent of the workforce in its warehouses considered
contract or temporary employees, according to ILSR.
For years, one of Amazon’s biggest edges over competitors
was that it didn’t collect state sales tax, giving it a price advantage
equaling as much as 9 percent in states like New York. That income, experts
say, deprived states of revenue and contributed to budget shortfalls.
That changed on April 1. Amazon is now collecting state
taxes in the 45 states that have them, according to the Tax Policy Center.
“But the damage was done,” said Flickinger. “The money
that was not collected can’t be made up, and those budget deficits are going to
force state governments to lay off employees at unprecedented rates.”
Bezos is hardly cowed by critics or allegations that
Amazon is a job wrecker.
Such taunts almost seem to embolden the brash
entrepreneur, whose vision for the company includes convenience stores without
cashiers, deliveries with drones and, irony of ironies, opening bookstores.
Bezos has shown an unlimited ability to spend money to
accomplish his goal of dominating different sectors.
And now the grocery business may be in his cross hairs.
He is developing an Amazon Go store, which will allow the company’s Prime
customers to pull items off shelves and carry them home without passing through
a cashier’s line or opening their wallets.
Customers simply scan their phones on a kiosk when they
enter the store, and Amazon technology charges their account after they leave
the store.
The stores require way fewer employees — and could drive rival
grocers out of business.
Bezos’ hiring announcements generate excitement in the
media, most recently in January, when he revealed a plan to add 100,000
employees over the following 18 months.
But left unsaid are all the jobs quietly killed off over
the years — in bookstores, electronics chains, office-supply shops and soon,
perhaps, supermarkets.
And maybe, too, another block in another town left a
little less active.
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