The cutthroat jobs strategy Amazon uses to conquer retailApril 25, 2017
By Lisa Fickenscher, NY Post
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.
“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.
“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.