Wednesday | November 22, 2017
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Why the explosive growth of e-commerce could mean more jobs

WASHINGTON — When the robots came to online retailer Boxed, dread came, too: The familiar fear that the machines would take over, leaving a trail of unemployed humans in their wake.

“I had a lot of people asking me, ‘What is going to happen to us?’” says Veronica Mena, a trainer for the e-commerce startup, recalling the anxiety that rippled through her co-workers after company executives announced plans to open an automated warehouse in nearby Union, New Jersey.

Yet their fears didn’t come to pass.

When the new warehouse opened this spring, workers found that their jobs were less physically demanding than at the older, manual warehouse in Edison, New Jersey. Instead of walking thousands of steps a day loading items onto carts, employees could stand at stations as conveyor belts brought the goods to them.

And rather than cutting jobs, the company added a third shift to keep up with rapidly growing demand.

What happened at Boxed — and has occurred elsewhere — suggests that widespread fears about automation and job loss are often misplaced. Automation has actually helped create jobs in e-commerce, rather than eliminate them, and stands to create more in the years ahead. By accelerating delivery times, robotics and software have made online shopping an increasingly viable alternative to bricks-and-mortar stores, and sales have ballooned at online retailers.

The surge in e-commerce has required the rapid build-out of a vast network of warehouses and delivery systems that include both robots and human workers. The robots didn’t take jobs from people, because many of the jobs didn’t exist before.

“We’re not looking to do the same work with half the people,” said Rick Zumpano, vice president for distribution at Boxed. “Since we’re growing, we need everyone.”

Newer robotic technologies do loom as a threat to some e-commerce jobs. Startup robotics companies are developing robot arm prototypes, for example, that can pick goods from shelves. Those devices may replace some workers over the next decade.

But the explosion of e-commerce and the ease of automation are leading e-commerce companies to build more warehouses. So even if each warehouse employs fewer workers, the proliferation of new warehouses is projected to generate hiring across the industry.

In the meantime, jobs have been lost at storefront retailers, which have suffered under the e-commerce onslaught. Venerable chains such as Toys “R” Us, RadioShack, and Payless Shoesource have all filed for bankruptcy this year.

There are widespread fears that things will get only worse for the nation’s 16 million retail workers. Self-checkout kiosks and experimental stores like Amazon’s Go, which has no cashiers, could theoretically eliminate millions of retail jobs.

But worries about a “retail apocalypse” have missed a more important trend: E-commerce actually leads to more jobs by paying people to do things we used to do ourselves.

When people shop online, tasks that once filled their days — driving to a store, searching through aisles for a product, bringing it to a cashier and paying for it — are now done by warehouse employees and truck drivers. People spend less time shopping than in the past, research shows.

Joe Song, an economist at Bank of America Merrill Lynch who has studied government data, has found that working women are spending less time shopping — nearly 25 hours less per year compared with a decade earlier. Song attributes the time savings mainly to e-commerce. Families increasingly outsource shopping to e-commerce employees, just as many have long outsourced other household tasks to child care workers or house cleaners. In each case, jobs are created.

That means the bankruptcies and store closings in the retail sector aren’t the complete picture. While jobs have been lost in stores, many more have been gained from online shopping. Michael Mandel, an economist at the Progressive Policy Institute, calculates that the number of e-commerce and warehousing jobs has leapt by 400,000 in the past decade, easily offsetting the loss of 140,000 brick-and-mortar retail jobs.

Amazon accounts for much of the additional employment. Yet it’s also at the vanguard of automation. Since 2014, Amazon has deployed 100,000 robots in 25 warehouses worldwide. At the same time, it’s nearly tripled its hourly workforce, from roughly 45,000 to nearly 125,000.

Its use of robotics has shaved the operating costs for a warehouse by about 20 percent, according to a report by Deutsche Bank. Such savings, in turn, have lowered the cost for Amazon to open new facilities — and hire more workers.

Mandel points out that it’s a lot like what happened more than a 100 years ago, when Henry Ford’s installation of assembly lines — an early form of automation — helped reduce the price of cars, which boosted demand so much that Ford needed more workers.

Robots have displaced many manufacturing workers in the past two to three decades, enabling factories to produce more with fewer employees.

Yet e-commerce and warehousing are growing far faster than manufacturing is — a crucial difference that lessens the impact of automation. E-commerce sales are surging roughly five times as fast as storefront retail sales, according to market research firm Forrester. By 2022, they’re expected to account for 17 percent of all retail sales, up from 13 percent this year.

From a handful of distribution centers in 2000, Amazon now has more than 240 warehouses and smaller delivery facilities, according to MWPVL, a consulting firm. Those warehouses have created tens of thousands of jobs and boosted wages in some communities, which many local employers call “the Amazon effect.”

But Amazon is not the only company that has experienced growth due to e-commerce.

Walmart, the world’s largest retailer, recently opened its sixth e-commerce campus near Orlando, Florida. Like the others, it includes a million square foot warehouse.

Walmart is also expanding its online grocery pickup service to 2,000 stores, double the 1,000 where it is now available. It allows Walmart’s customers to order groceries online, but requires more workers, not fewer. Ravi Jariwala, a spokesman, says Walmart has created a new job classification — “personal shopper” — to do what customers once did themselves: Pick and package orders.

And XPO Logistics, which ships mostly appliances and other heavy goods, has hired 3,000 warehouse workers in the past year to keep up with growing e-commerce, bringing its total to 26,000. It’s adding a million square feet of warehouse about every four to six weeks, says Ashfaque Chowdhury, president of XPO’s supply chain.

 

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