By Elisabeth Buchwald and Andrew Keshner
Jeff Bezos is stepping down as Amazon’s CEO, but he’ll be leaving a massive footprint on the way consumers shop and the way employees work.
Bezos redefined the idea of what counts as convenient for customers and will go down in the history books as the “pioneer for online sales,” one expert said.
Bezos added to the headwinds facing small businesses, but he supplied them with a powerful selling platform too. He received high-fives from workers and even Sen. Bernie Sanders when he announced a $15-an-hour minimum wage for all employees. But he has come under fire for the higher than average turnover rate at warehouses and working conditions there.
In his announcement Tuesday, Bezos said Amazon /zigman2/quotes/210331248/composite AMZN -0.81% has managed to defy all kinds of expectations.
“Invention is the root of our success,” Bezos wrote on the heels of an earnings report with record-breaking sales topping $100 billion. “We’ve done crazy things together, and then made them normal. … If you get it right, a few years after a surprising invention, the new thing has become normal. People yawn. And that yawn is the greatest compliment an inventor can receive.”
Bezos — who’s personally worth $197 billion according to the Bloomberg Billionaires Index — isn’t leaving the e-tail and cloud-computing giant altogether. He’ll stay on as the executive board chairman, beginning in 2021’s third quarter. Andy Jassy, the current head of the cloud unit Amazon Web Services, will succeed Bezos as Amazon CEO.
Bezos focuses on the positive in his announcement, but he has his critics, to be sure. A unionization vote at an Alabama warehouse is scheduled to start Feb. 8, and Amazon, as a card-carrying member of Big Tech, has an antitrust target on its back on Capitol Hill.
Below is a look at three ways Bezos changed the lives of consumers and workers in America.
What does “convenient” mean to customers? Bezos changed the answer.
When Bezos first started, a common question, he said, was “What’s the internet?” Now — especially 11 months into the COVID-19 pandemic — the question is probably more like “How did we live without the internet?”
In addition to vast swaths of the workforce suddenly working remotely, e-commerce retail sales reached almost $795 billion last year, according to eMarketer projections. There were at least $1 billion online sales every day of the 2020 holiday shopping season, according to Adobe data.
Bezos has a lot to do with this shopping landscape, according to Julio Sevilla, a marketing professor at the University of Georgia. Amazon didn’t invent online sales, Sevilla noted, but it was the first to put it on the map for a wide range of shoppers. When the history books talk about the advent of online shopping, the driving force is “going to be Jeff Bezos,” he said.
Retail sales depend on pillars like price, store location and quality, Sevilla noted. But Amazon Prime memberships promising free same- and one-day delivery on a wide array of goods reshuffled those pillars, he said. “Convenience went from a place’s location to how fast Amazon can send you something,” he said.
There’s an “Amazon effect” according to Diana Smith, associate director of retail and e-commerce at Mintel, a consumer research firm. Customers will measure other companies against Amazon on customer experience, added shipping fees and swiftness of receipt, she said.
82% told Mintel that Amazon changed their definition of convenience, Smith said, recapping a 2020 survey of 2,000 people. 72% of consumers said they expected more of other retailers because of Amazon, she said.
A pioneer in offering $15 minimum wage for employees, but with a lot of fine print
When Amazon announced it was raising its company-wide minimum wage to $15 an hour in 2018, Sen. Bernie Sanders, the Vermont independent and two-time contender for the Democratic presidential nomination, gave the company a rare pat on the back. He even urged other corporate leaders to “follow Mr. Bezos’s lead.”
Bezos responded to Sanders’s tweet:
The $15 minimum wage applies to part-time and seasonal workers in addition to regular full-time employees. It likely lures many people to work at Amazon. But it doesn’t apply to independent contractors who facilitate deliveries through the Amazon Flex platform and employees of companies Amazon has subcontracted out work to.
Flex workers, like Uber /zigman2/quotes/211348248/composite UBER -4.14% and Lyft /zigman2/quotes/208999293/composite LYFT -2.41% drivers, don’t have workers’ compensation benefits but are eligible to receive tips from customers. The company settled a $61.7 million case with the Federal Trade Commission on Tuesday which alleged that Amazon did not give Flex drivers the full amount of tips they earned over the course of two-and-a-half years.
Rena Lunak, an Amazon spokesperson, told MarketWatch that Flex drivers “earn among the best in the industry at over $25 per hour on average.”
Separately, smaller delivery companies in the U.S. vying for an Amazon contract are incentivized to “drive down working conditions” to cut down costs, said Laura Padin, a senior staff attorney at the National Employment Law Project, an advocacy organization focused on workers’ rights.
But even with higher wages, the worker turnover rate at Amazon warehouses is significantly higher than that at other warehouses.
The average turnover rate for warehouse workers in California counties with Amazon fulfillment centers was 100.9% in 2017, according to a March 2020 report published by NELP. In comparison, the overall warehouse worker turnover rate in California and in the U.S., were 83% and 69.8% in 2017.
“The picture this paints is that the company views its workers as disposable,” Padin told MarketWatch.
That is likely a result of the high injury rates workers have reported. In 2019, some 14,000 workers at Amazon fulfillment centers had serious injuries that required days off, according to a Reveal analysis of internal Amazon data. That works out to 7.7 serious injuries per 100 employees. The industry average was around 4 serious injuries per 100 employees in 2019, Reveal reported.
“The pace of the work is backbreaking,” Padin said. “It requires repetitive motions like lifting that causes musculoskeletal disorders at a pace that is unsustainable.”
“The work is so much more physically grueling that workers don’t stick around,” said Rebecca Kolins Givan, a professor at Rutgers University’s School of Management and Labor Relations. “Ultimately, they decide that they’ll take a lower pay job at a workplace that isn’t taking such a toll on their bodies.”
“With the size of Amazon’s workforce they have a real opportunity to set standards for workers — whether that means giving them a voice on the job or having safer workplaces,” Givan said. Yet despite Amazon’s increased profits during the pandemic, “workers who have been deemed so essential are being left in harm’s way,” she said referring to COVID outbreaks that were reported at some warehouses.
“ Nothing is more important than the health and safety of our teams,” an Amazon spokeswoman told MarketWatch. “Last year alone we invested billions of dollars in new operations safety measures, ranging from technology investments in safety to masks, gloves, and the enhanced cleaning and sanitization required to protect employees from the spread of COVID-19.”
Small businesses learned ‘it’s better to join Amazon than fight them’
It’s easy to forget that Amazon was once a small business.
Born out of Bezos’ garage in 1995, Amazon was simply an online book store. Nowadays Amazon has become a one-stop shop for everything from baby diapers to movies and that’s had a crushing impact on many brick-and-mortar small businesses in the U.S.
Small business owners cited Amazon as the top cause for their declining sales in a 2017 survey conducted by the Institute for Local Self-Reliance, a nonprofit small business research and advocacy group.
But the pain small business owners have felt in the Amazon age hasn’t come without gains, said Arthur Dong, a professor of strategy and economics at Georgetown’s McDonough School of Business.
“You have to give Amazon a lot of credit — they have quite literally created an opportunity for those smaller businesses that have latched onto Amazon’s sales platform.”
Some 1.7 million small and medium-sized businesses in the U.S. list products on Amazon, a company spokeswoman previously told MarketWatch. That costs businesses $39.99 a month plus additional transaction and fulfillment fees on each sale.
“Independent businesses account for approximately 60% of all physical product sales on Amazon, and those sales are growing faster than our own retail sales,” a company spokeswoman added.
Small and mid-sized businesses sell an average of 6,500 products on Amazon every minute, according to the company.
Over time, small and medium-sized businesses have learned that “it’s better to join Amazon than fight them,” Dong said. “Many have had tremendous success as a result of being able to expand beyond the reach of their local communities.”