Amazon Generates Twice as Much Revenue per Employee as Wal-Mart

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Wal-Mart (NYSE: WMT) might be the world's largest retailer, but it takes a lot of people to support the company and its 11,723 stores around the world -- 2.3 million people, to be exact. That's how many employees Wal-Mart had at its latest update. By comparison, Amazon (NASDAQ: AMZN) ended its first quarter with just 351,000 employees.

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Such are the advantages of a retail operation without cashiers or stockroom workers. Amazon workers still have to deal with massive warehouses full of over 50 million different items, but Amazon gives them help through the use of automated robotics systems. As a result, Amazon employees generate twice as much revenue as Walmart workers.

Some quick math

I put together a nice little table breaking down Wal-Mart's and Amazon's latest quarter.

Company

Revenue

Employees

Revenue/Employee

Amazon

$35,714,000,000

351,000

$101,749

Wal-Mart

$117,542,000,000

2,300,000

$51,105

It's important to note, however, that Amazon's workers are becoming less efficient. The company's been on a hiring spree lately, with its employee count growing 43% year over year in the first quarter. That drastically outpaces its consolidated revenue growth of 23%.

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In fact, Amazon's employee count has increased more than 40% in five of the last six quarters. Sales growth hasn't topped 30% in that same period.

One of the big reasons for the ramp in employment is that Amazon is undergoing significant investments to bring new fulfillment centers online. That requires a lot of overhead (including labor) upfront while it ramps up the usage of its new warehouses.

Amazon opened 26 new fulfillment centers in 2016, most of which came in the second half of the year, just ahead of the holiday shopping season. As Amazon's sales continue growing in 2017 and beyond, these warehouses ought to become even more labor efficient than Amazon's previous warehouses.

A warehouse full of robots

Amazon's newest fulfillment centers are its eighth generation, and they rely heavily on robotics. Robots can more quickly pick items out of the warehouse and can bring them to workers to package. Amazon President of Worldwide Operations Dave Clark said the robots help cut order processing time from an hour-and-a-half to as little as 15 minutes.

Additionally, the robots allow Amazon to store more items in the same amount of space since there's no need for aisles if the shelves can just move themselves. Clark says capacity in eighth-generation warehouses is 50% greater than the previous generation. So, not only do the robots help make workers more productive, since they do half the job for them, but they also help drive sales on Amazon.com for customers who want same-day or next-day delivery.

What will Amazon do with Whole Foods?

Amazon has agreed to buy Whole Foods Market (NASDAQ: WFM) for $13.7 billion. Like Wal-Mart, Whole Foods relies on brick-and-mortar storefronts full of people stocking shelves and checking out customers at registers. And with a more customer-focused workforce than Wal-Mart -- which is more efficiency focused -- it's no surprise that Whole Foods generates less revenue per employee than Wal-Mart. Last quarter, the company generated just about $43,000 per employee.

Amazon may bring some changes to Whole Foods stores that positively impact worker efficiency. It's been experimenting in Seattle with a convenience store with no cashiers, called Amazon Go. It uses machine vision and other artificial intelligence to track which items shoppers place in their basket, and automatically charges their Amazon accounts after they walk out. That would enable staff to walk around and help customers more, or slash jobs, as was rumored over the weekend following the deal announcement.

Additionally, Amazon is expected to use Whole Foods as a stepping stone to reach more customers through online grocery delivery. Online ordering can help increase the average number of tickets per hour, but may require someone to physically go pick out items.

On the other side of the equation, however, Amazon is expected to try to lower prices at Whole Foods in order to help it compete with Walmart and other grocers. That could drive average ticket value lower, offsetting the efficiencies gained through technology.

Overall, investors should expect Amazon to institute some of its employee-efficiency magic to help make the combined Whole Foods/Amazon more efficient than Walmart.

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John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. The Motley Fool has a disclosure policy.