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March 15, 2017, 9:12 a.m. EDT

Amazon is going to kill more American jobs than China did

Millions of retail jobs are threatened as Amazon’s share of online purchases keeps climbing

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By Rex Nutting, MarketWatch

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Meanwhile, online sales jumped by $13.7 billion through the third quarter of 2016, with Amazon accounting for most of that. It is expected to overtake Macy’s as the country’s top retailer of apparel this year.

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At current growth rates, Amazon would have annual revenue of $500 billion in five years. As traditional retailers close stores and dismiss workers, shopping at the mall will make less and less sense.

There’s not much retailers like Macy’s, The Gap /zigman2/quotes/206554267/composite GPS +3.05%  , Best Buy /zigman2/quotes/205918291/composite BBY -1.84% , and Barnes & Noble   can do about it. Their business will be much, much smaller. And now that Amazon is getting serious about groceries, even Wal-Mart /zigman2/quotes/207374728/composite WMT +0.11%  is threatened.

Although retailers have been laying off workers, they probably aren’t laying off enough, considering how quickly their sales are eroding. While sales fell 0.6% in 2016, employment at the GAFO stores increased by 1.6%, or about 95,000. You don’t make money by hiring more people to sell less.

So what’s the big deal? Won’t the people who once worked at Macy’s just work at Amazon instead? Well, no. Amazon needs about half as many workers to sell $100 worth of merchandise as Macy’s does. Macy’s has floor walkers, and saleswomen at the makeup counter to give personal attention, and cashiers, if you can find one.

By contrast, Amazon has “pickers” in warehouses who grab hundreds of items off the shelves every hour. Amazon just announced it would hire a lot more pickers this year as it opens more distribution centers. But even those jobs are threatened by Amazon.

That’s because Amazon is at the forefront of automating retail. More and more of the work in the warehouses will be done by robots, and Amazon contemplates deploying flying drones (robots) to deliver the packages to your door. Amazon’s concept for selling groceries includes almost no workers, because customers will check themselves out and robots will restock the shelves.

What’s most troubling to brick-and-mortar retailers and their workers is that Amazon’s sales growth is accelerating (19% in 2014, 20% in 2015 and 28% in 2016), and shows no sign of plateauing. Amazon isn’t just taking sales from brick-and-mortar stores; it’s also taking market share from traditional retailers’ online stores.

Read: U.S. retail sales barely budge in February

Amazon is also moving aggressively into warehousing and package delivery services, which combined employ 2 million workers, including 600,000 at the post office. How many of those jobs will Amazon’s drones take?

Could Amazon actually kill more American jobs than China did? It’s quite likely. Economists David Autor, David Dorn and Gordon Hanson have estimated China’s manufacturing exports to the U.S. may have cost as many as 2 million jobs.

If Amazon can capture 40% of the GAFO market within five years (as seems likely), about 1.5 million jobs at brick-and-mortar stores could be lost. Add in the jobs Amazon will kill at grocery stores, drugstores, warehouses and delivery services, and the total would be well over 2 million.

And unlike the manufacturing jobs lost to China, which were clustered in a comparatively few counties, those retail jobs are located in every city, town and hamlet in America.

Don’t worry, though. Economic theory says the displaced workers will find other jobs as the economy grows more productive. And Amazon will pay you a couple of bucks if you’ll use your own car to deliver packages to your neighbors.

$ 12.52
+0.37 +3.05%
Volume: 6.43M
May 16, 2022 4:03p
P/E Ratio
Dividend Yield
Market Cap
$4.49 billion
Rev. per Employee
$ 84.77
-1.59 -1.84%
Volume: 3.02M
May 16, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$19.45 billion
Rev. per Employee
$ 148.21
+0.16 +0.11%
Volume: 7.15M
May 16, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$407.55 billion
Rev. per Employee

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington. Follow him on Twitter @RexNutting.

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