Thursday, March 16, 2017

Looking for an easy target, to blame for something difficult

I was annoyed by an article at Market Watch yesterday, headlined 'Amazon is going to kill more American jobs than China did'. has been crowing about its plans to create 100,000 American jobs in the next year, but as with other recent job-creation announcements, that figure is meaningless without context.

What Amazon won’t tell us is that every job created at Amazon destroys one or two or three others. What Jeff Bezos doesn’t want you to know is that Amazon is going to destroy more American jobs than China ever did.

There's more at the link.

The article's basically a scare story about how Amazon's going to kill off up to two million American jobs, and replace them with a far smaller number of warehouse picking-and-packing positions.  Unfortunately, it ignores a number of basic realities.

  • Old-style jobs have been vanishing since the 1960's.  The Internet merely accelerated that trend.  Amazon isn't to blame for that - it rose out of the success of the Internet, and has built on that success with its own, but it didn't start the ball rolling.
  • Companies who are currently struggling to attract customers, such as retail stores, often have themselves to blame for their predicament.  They stock limited merchandise, employ the minimum number of store staff (many of whom have no idea what they're selling or how it works), offer minimal customer service (and that only because they can't get away with killing it completely), and focus on returns to their shareholders and bloated salaries for their executives, rather than attracting the consumer with his or her dollars.  Funny, stores back in the '60's and '70's got that right . . . I wonder what changed?
  • Yes, Amazon is threatening 'traditional' US jobs, but it is under threat itself.  China's Alibaba Group and other mammoth Internet wholesale and retail suppliers are dominant in their countries, and expanding into the US market, just as Amazon is trying to expand into theirs.  They're a major threat to any business, not just Amazon.  Consider:  "Alibaba's annual web sales easily surpass U.S. e-retail sales", and "Alibaba generates more revenue than Amazon and eBay combined".  One false move by any consumer supplier, anywhere, and these competitors will take over in a heartbeat.
  • It's a competitive, dog-eat-dog world out there.  That's what ensures that companies such as Amazon and Alibaba innovate constantly, stay hyper-alert to latest trends, and do their very best to safeguard their own positions.  If they don't, they're toast.  What's stopping other companies, such as traditional retailers, from adopting a similar attitude?  Why should they be protected from the same commercial realities that threaten Amazon every single day?

The world is changing.  It's been changing since long before humanity emerged on the scene, and it'll go on changing long after we've vanished into the mists of history.  Today's economic challenges are sometimes frightening, but the fact that they exist is nothing new.  Every generation has faced economic challenges, from simply surviving in a time of famine and disease, to prospering in an era when everyone else is chasing the same dream.

Amazon isn't the cause of economic change.  It's merely a symptom.  Blaming it won't solve the problem.  The only solution is to ride the tide of change, and adapt to it, and find new ways to stay afloat when the water level rises.  Clinging to the familiar, stable rocks on the shore won't help when the tide's over your head.  You'll still drown.

Welcome to reality.



Jonathan H said...

Amazon itself is under threat from other American options as its competitors figure out online sales and connect better with their customers. In the last year, Walmart's online sales grew more than Amazon's did. They have found (are finding?) success at leveraging their existing customer base and offering ship to store on items that Amazon can't or won't ship - like guns, car and deep cycle batteries, etc.
One of the reasons Amazon has done so well is because they were first into the market and because their shareholders have so far accepted little profit; their price earnings ratio is very high like a tech company but they are ultimately a sales company - at some point, investors will push for a profit and they will have trouble.

CGR710 said...

Yeah, well Amazon's biggest business is actually produced their cloud services division not their e-retailer business. Actually Amazon is the biggest cloud service provider worldwide, which shows how aware Bezos is on the necessity of... "Riding the rising tide" as Peter used to say (or quote).

Anonymous said...

I wonder if I'm being naive here.
If millions buy products from Amazon's retail website, does this not mean good news and expanded markets for the companies producing those products ?
Unlike shopping at Walmart (for example), we get to pick and choose manufacturers when we shop at Amazon - we're not limited only to what Walmart wants to stock.
- Charlie

Anonymous said...

Living in the sticks Amazon and the internet in general is a godsend. Our local options 25ish miles or so round trip are extremely limited. They either don't have what we want, service is many times lacking and the markup borders on the ridiculous. We TRY to buy local but much of the time it just isn't feasible. To get to the nearest Wal-Mart or Aldi (cut rate food store) it's an hour each way. We TRY to patronize our local small grocery store as much as possible but have to watch for sale items because regular prices can be 2 to 4 times as much as Wal-Mart. Even with a Wal-Mart 2 hours away round trip a majority of non food items get bought on Amazon prime or the internet. It's cheaper and the fuel savings are substantial. Suppose I need a quality electric drill. I can get certain brands local but the price is marked up 30 to 50 percent of more. To get to a home depot or Lowe's it's about 3 hours round trip. Amazon prime will have it just as cheap and it's at my house in 2 days max. I can't afford not to buy it online. A note about Wal-Mart's website. It's almost unusable. We've tried to buy from it but it's so buggy and frustrating we just go to Amazon. You'd think a multibillion dollar corporation could hire competent people to create a usable website in 2017. This is a very bad sign for the core management of Wal-Mart. No wonder Amazon is eating your lunch.

Post Alley Crackpot said...

I'm waiting for the US Postal Service to fail and to be privatised by Amazon.

Imagine "Amazon Eagle Prime" -- unlimited domestic mail and small packet service with a yearly maximum of twelve thousand pounds of domestic parcels for $1299 per year, with delivery of mail to your door if you're at home.

They'd quickly turn into the best funded company in America from their rural customers alone.

lcfulton said...

Fix something, build something, or get the somethings to the consumer(Amazon) and get off your ass. There... fixed the fear of Amazon.
I'm now a retired, mostly tired, welder and plumber and was never out of work for more than a couple of weeks, except by choice.
Peter, you are a great example of finding something people want, something you can do, and then doing it. Nobody ever said it was easy or fast or even fun but it beats the s**t of sitting around on your ass. Or hiring out as a paid protester for the Demo's.

Anonymous said...

A note about Wal-Mart's website. It's almost unusable

It's getting better.

Given the absolute ability the computers in Walmart have to see where *anything* is... This is somewhat amazing. Then I ran into a former Walmart guy, getting his PhD. (with employment offers for him and his wife if he decides to go back once he gets his degree.)

Seems that the web stuff was a line they didn't quite understand, early on, and so Walmart went and got someone who did.

West Coast, of course, and on a contract basis. As the web grew into what is today, Walmart has decided to go for the gusto, and integrate them.. So they bought out the company they were contracting with, and are bringing everybody inhouse...

But yeah, the web guys had their own way to do stuff, and their own inventory at some point... Integrating the two systems is quite the job.

R. Nevikov said...

From commenters above:

A note about Wal-Mart's website. It's almost unusable. We've tried to buy from it but it's so buggy and frustrating we just go to Amazon.

A note about Wal-Mart's website. It's almost unusable

First, Walmart is not the Lone Ranger in this - the number of incompetently built and nearly non-functional customer-access websites is staggering. There's a surprising amount of work in the integration of existing business operations and fully functional web presence, and often the two are incompatible. The result of that is usually a horrendous kluge of work arounds, make-dos, patchwork code, and a great deal of finger crossing.

Brick-and-mortar is easy to conceptualize, and there are centuries of working models to show how it's done, with varying degrees of success. Online is a completely new environment, and a brain thoroughly inculcated in B-and-M doesn't have the experience, and usually, the flexibility, to accommodate the different environment.

Second, in B-and-M if it's not on the shelf within customer view it can't be sold to generate profit; in Online if it's on the planet, and you can put the right wheels or wings under it, at the right cost, one can probably sell lots of whatever it is. The message there is that Online is not an adjunct pasted onto to your existing operation, it is your operation, and that your B-and-M operations are Just Another Sales Portal, albeit limited capacity sales portals that can be tailored to local, and sometimes very local, requirements (it needs to be noted that B-and-M is not free: construction costs, maintenance, staffing, inventory expense, etc. is the analogue to warehousing, order pulling, shipping, etc., in Online).

There are huge costs associated with revamping existing inventory systems and the business processes they support to accommodate new sales methodologies - frequently everything has to be nuked, if only to avoid trying to salvage sunk cost with a plethora of pasted-together kluges that prevent anything from working right.

Amazon figured this out early, and had the benefit of not having the anchor weight of B-and-M to drag along (there's a reason Amazon is so big in cloud computing - it's a logical extension of what it had to do to operate a huge Online business). BTW, much of that B-and-M "anchor weight" is between management's ears.

As Amazon sticks its toes into the B-and-M waters their success, if any, will be worthwhile to analyze.