The Consequences of Convergence: How Amazon and Walmart Are Becoming More Alike

Technology, globalization and the financialization of the economy are driving companies to be more like each other. In order to generate the returns demanded by investors and lenders they have to pursue efficiency in ways that reduce options but increase perceptions of performance.

Walmart and Amazon are apt examples of how this process plays out in real time and real life.

Walmart's growth has slowed over the past decade as it has saturated the US and found that its scale advantages are not as potent in India, China and the rest of the developing world due to local wariness about the impact that American hegemony may have on future economic prospects for the people who live there. It's efforts have not been helped by its reputation for often abusive treatment of its workforce. In addition, its penchant for going along with indigenous practices in some regions, like bribery which, because of its size, always seems to get it caught by authorities. So Walmart has announced its determination to become more of a force in ecommerce to increase its own sales and profits while challenging the success of Amazon, its online competitor in scale and scope.

Amazon, meanwhile, having increasingly lost its tax-free internet sales status as the net's success has become manifest, is increasingly accused of employing Walmart-like labor practices in order to defend its margins. The company has also announced plans to go retail, again to stimulate sales growth - and to stymie Walmart.

Due to the lingering recession and the desperation in both developed and developing nations for jobs, however low paying and insecure, both companies are finding that local authorities will fight to offer concessions in order to win whatever jobs may be offered - and to wring whatever tax revenues they have not conceded to prevail in the competition for new business operations. This despite the record of companies abandoning locales which no longer serve their purpose.   

 That these companies increasingly mirror each other in size, strategy and practice is not coincidental. This is a world which they have played a large role in creating. Whether it serves them well or becomes a trap from which they will struggle escape is by no means clear. JL

Jeff Ostrowski reports in the Palm Beach Post:

State and local officials are vying to award millions in incentives to lure three massive Amazon warehouses — even though many of the 3,000 jobs will be tedious, physically demanding and not particularly lucrative or stable.
In Pennsylvania, an Amazon warehouse was so oppressive during a summer heat wave two years ago that an ambulance waited outside to whisk away victims of heat stroke. In Kentucky, Amazon workers said they were urged not to report minor injuries suffered as they frantically filled orders.
In England, residents of a former coal-mining town describe the minimum-wage jobs at an Amazon warehouse as grueling. And in Germany, Amazon warehouse workers have staged strikes in recent months to demand higher pay.

Amazon already has announced plans for a warehouse in Ruskin, south of Tampa, and Palm Beach County economic developers have submitted sites in hopes of luring one of the distribution centers here.
Hillsborough County and the state have offered $10 million in incentives to bring an Amazon warehouse to a site near Interstate 75. Amazon has yet to announce where it will build two other Florida distribution centers, but that sum suggests counties and the state might dangle a total of $30 million in subsidies for the Seattle-based retailer.
The courtship of Amazon marks a change from Florida’s decade-old strategy of chasing high-tech, high-wage jobs. Under former Gov. Jeb Bush, Florida embarked on a $1.5 billion investment in biotech. Under former Gov. Charlie Crist, state and county officials thrust $135 million at animation company Digital Domain Media Group.
The state’s new nonprofit biotech institutes have hired research scientists but have yet to spur private-sector hiring, and Digital Domain collapsed last year. With Florida unemployment at 7.1 percent in May and 658,000 people officially looking for work, the state’s labor market needs jobs, regardless of whether they pay well.
“Jobs have been so scarce in this economy that I don’t think we can afford to turn them away,” said Mark Vitner, chief economist at Wells Fargo. “One of the big things we’ve been missing in this recovery is growth in entry-level positions. The most important skill a new worker can learn is to show up and do a good job, and if you don’t have a job, you can’t do that.”
As Amazon (Nasdaq: AMZN) opens warehouses throughout the country, it’s hiring thousands of temporary workers. Help-wanted ads posted by Amazon’s staffing firm describe a “very fast-paced environment” that “will occasionally exceed 90 degrees.” Applicants need a high school degree and “must be able to stand/walk for up to 10-12 hours,” the ads say.
Hourly pay is $10.50 to $11 at Amazon warehouses in Virginia, $11.50 to $12.50 in Indianapolis and $12.50 to $13.50 in Pennsylvania.
That’s more than many warehouse workers make, said Brian Devine, vice president at ProLogistix, a staffing firm in Atlanta. Entry-level jobs in distribution centers attract the working poor, people who “buy gas three gallons at a time,” Devine said.
“These associates are reaching into their pocket, finding $13 and buying a few gallons — and hoping like crazy it gets them back and forth to work for the balance of the week,” Devine said.
A worker making $13.50 an hour at a full-time job would gross about $28,000 a year. In documents filed with Hillsborough County, Amazon said its Ruskin warehouse would create 375 jobs at an average wage of $47,581. Amazon didn’t disclose pay information about the additional 625 workers it has said it will hire, but distribution experts said many of those jobs will be seasonal positions.
The average wage figures could be skewed by high-paying jobs for managers and office workers, said Daniel Krassner, executive director of the research institute Integrity Florida. He said the state should require employers to disclose the median wage — a statistic that’s often lower than the average.
Still, economists say, Florida needs low-wage jobs.
“Not everybody can work at Scripps, and we need jobs across the labor-market spectrum,” said Sean Snaith, an economist at the University of Central Florida.
Amazon isn’t Florida’s first investment in distribution. The state has spent $425 million on ports over the past three years to prepare for the expansion of the Panama Canal. Palm Beach County — which hopes to land one of the Amazon warehouses — in 2011 offered $1.7 million in incentives to grocer ALDI, which is building a food distribution center in Royal Palm Beach.
One advantage to distribution jobs: Unlike factory positions, they can’t be moved to China.
“Regardless of where the products are made, they’ve got to be distributed here,” Devine said.
Another advantage: Many warehouse jobs require only modest skills and education. That means they’re tailor-made for Florida, a state where only 34.6 percent of residents older than 25 hold an associate’s or bachelor’s degree, according to the Census Bureau.
“There’s still going to be a fair number of students who never get degrees beyond high school, or who don’t even graduate high school,” said Henrik Christensen, head of the Georgia Institute of Technology Center for Robotics and Intelligent Machines. “We need to have jobs for them, too, and this is a way of making sure they still have a job. It’s a low-paying job, but it’s a job.”
Automation is taking hold in warehouses, but it’s likely to be decades before robots replace workers, Christensen said.
Amazon last year paid $775 million for Kiva Systems, a maker of robots that carry orders through warehouses. The machines might replace some workers, but they’re also saving humans from long walks, Christensen said.
“What we call the dirty, dull and dangerous, where you do the same thing over and over again; those are the jobs we’re trying take away,” Christensen said.
In the meantime, Amazon needs human beings to do the hard work of filling orders at high speed. Amazon did not respond to queries about its pay and working conditions, but the demands of the job have elicited no shortage of complaints.
The Morning Call of Allentown, Pa., reported in 2011 that so many workers at Amazon’s Lehigh Valley warehouse were stricken with heat-related illnesses that an ambulance was stationed outside the facility. Amazon later announced it would spend $52 million to install air conditioning at that warehouse and others.
“It’s not easy to retrofit an existing fulfillment center with air conditioning,” Jeff Bezos, Amazon’s billionaire CEO, said last year during the company’s annual meeting. “We’re really leading the way here.”
The Seattle Times reported last year that workers in Amazon’s Campbellsville, Ky., warehouse were pressured not to report work-related injuries. The paper quoted a former worker who said Amazon refused to acknowledge that the stress fractures in her feet were caused by walking miles on the warehouse’s concrete floors.
And in March, the Financial Times reported that residents of a Staffordshire town hoped Amazon would fill the void left by a long-closed coal mine. Instead, one local likened the warehouse to “a slave camp.”