Amazon Go Is No Job Killer
The reaction toAmazon.com's(NASDAQ: AMZN) new cashier-less store was predictable.
The New York Postcalled it out on its cover as "the next major job killer" with images of Amazon robots taking over.Forbessaid that such stores would "eliminate thousands of jobs."
The new Amazon Go store. Image Source: Amazon.
Indeed, the new store concept, dubbed Amazon Go, which has a network of cameras and microphones that detect what customers take off the shelves so it can charge them without them going though a checkout process, would seem to threaten the jobs of cashiers across the country, and there are a lot of them. According to the Bureau of Labor Statistics, there are nearly 1 million supermarket cashiers in the country, and 3.4 million cashiers across all of retail.
But the notion that Amazon is "killing jobs" seems to be misguided for a number of reasons.
Operating in industries that essentially did not exist before its founding 21 years ago, Amazon had 306,800 employees as of its third-quarter report, an increase of 38% from a year ago. By entering disruptive, potentially "job-killing" industries like e-commerce, e-books, and even video streaming, Amazon is becoming one of the country's largest employers.By comparison,Costco(NASDAQ: COST), the leading warehouse retailer -- with revenue nearly equal to Amazon -- employs just 117,000 people. From an employment perspective, Amazon offers a much better model, and through externalities, Amazon helps employ thousands of other Americans, like vendors who sell on its marketplace and delivery truck driverstasked with delivering the approximately 1.6 million packages it ships a day.
Amazon also plans to hire 120,000 temporary workers this holiday season. After last year's holiday hiring surge, it kept 14,000 of its seasonal workers on as full-timers.
Jobs aren't easy to predict
It seems like a simple conclusion that the effect of a store concept like Amazon Go would be to eventually eliminate cashiers' jobs, but it's far from a foregone conclusion. Amazon has just started beta testing its store, so it's too soon to even say if such a model will go national, but technology that automates order-taking and payment is not new. Automated checkouts have been around for more than 20 years, but have not gone fully mainstream because they are prone to difficulty, in part because they are designed to prevent shoplifting -- something a human does much better than a machine.
Restaurants likeMcDonald'shave begun installing kiosks for customers to place their orders and pay, but those have mostly served as alternatives for customers when lines get too long rather than as a replacements for cashiers.
Seen from one perspective, Amazon's "Just Walk Out" technology is a response to other retailers who have neglected the customer experience by not hiring enough cashiers and often forcing customers to wait on long lines to check out and pay. A savvy response from a rival likeWal-Martmight be simply to hire more cashiers, thereby making its checkout experience less burdensome.
In other industries that have seen similar automation, the narrative didn't always go according to expectations. The spread of ATM's may offer the best corollary. Before the advent of cash machines, you had to speak with a human teller in order to take your money out of bank. But while ATM's have obviated the need for tellers to handle that task, they also helped spur a proliferation in bank branches, meaning the total number of tellers increased even though tellers per bank fell.
Another effect of automation is that front-line workers are often retrained for sales purposes, another thing humans still do much better than machines. According to the Bureau of Labor Statistics, the number of jobs requiring "interactions" has increased by 10 million over the last 15 years, while jobs based on transactions and production have fallen by almost 3 million in that time.
Bank tellers, for instance, now pitch credit cards, secondary accounts, and mortgages. New York's subway system replaced 600 token clerks with kiosks, but redeployed the people to be "subway concierges," among other roles.
The biggest irony of calling the Amazon Go concept store a job killer is that it appears to have more employees than the average equivalent convenience store. At 1,800 square feet, it's small -- about the size of a 7-11. While the average 7-11 would probably just have one or two employees working as cashiers and on food prep, Amazon Go appears to have a number of in-store employees working as chefs and on food prep, as the store is geared toward high-end consumers seeking freshly prepared foods.
There is no question that the job of a cashier is becoming less necessary. E-commerce has already proven that, but 3.4 million cashiers are not going to be laid off overnight. A far more likely result is that as automation spreads, they will be retrained or redeployed to perform more necessary tasks, and as Amazon's technology becomes more common, thousands of new jobs will be created.
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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
