The process of creative destruction is underway as online retailers, with Amazon in the lead, add far fewer jobs than traditional retailers are slashing.
Amazon, America’s biggest online retailer, announced this month that it will hire 100,000 new employees within the next 18 months, primarily at its fulfilment centres across the country. The announcement comes at a time of rapid decline in bricks-and-mortar retail in the US. Macy’s, the country's largest department store chain, recently announced plans to slash more than 10,000 jobs.
Amazon said that in addition to hourly warehouse workers, it will hire engineers and software developers. CEO Jeff Bezos and other technology executives have often sought to make the case that online retail creates jobs. It has cost many more, however, particularly unskilled positions at shopping centres and malls, many of which are being shuttered. As Harvard economics professor Lawrence Katz notes, “The workers they are hiring aren’t the same ones being laid off.”
As ecommerce exploded in the US, book stores and electronics retailers were among the first to feel the brunt. The U.S. Bureau of Labor Statistics found that since 2000, job losses in these two sectors alone were nearly double the number of jobs created. Traditional retailers have cut more than 200,000 jobs in the last four years.
“The number of jobs we are losing in retail outpaces the number being created in the sectors that are taking their place”, said Andrew Challenger, Vice President of Chicago outplacement firm Challenger, Gray & Christmas. Transportation firms and warehouses are hiring, for example, but not as quickly as bricks-and-mortar stores are laying off.
Online shopping is only part of the technological revolution bedevilling traditional retailers. Amazon is introducing automation, and uses robots in many of its warehouses. Further, driverless cars and drones pose a threat to truck drivers and delivery workers.
On the upside, the ecommerce sector is fuelling greater productivity. Michael Feroli, Chief United States Economist at J. P. Morgan points out that productivity in the retail sector, online and offline combined, rose by 3% in 2015 compared with just 0.8% for business overall. There is also greater efficiency to be found in ecommerce. As the New York Times reports, “The typical online retailer generates $1,267,000 in sales per employee versus $279,000 at bricks-and-mortar stores.”
Amazon’s 100,000 new hires represent a 56% increase in the number of full-time US employees it had at the end of 2016. The company has rapidly expanded its network of warehouses in the past six years. The expansion gained momentum as Amazon began making agreements with state governments to collect sales taxes. Its decision to make fast shipping a priority has also required opening more warehouses.
