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Amazon staffing crisis

Is Amazon heading for a customer experience crisis?

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Amazon could be heading for a customer experience catastrophe, according to market research firm eMarketer, which highlights some disturbing trends. 

1st Jul 2022
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Could Amazon be heading for a customer experience catastrophe? That's certainly the view of market research firm eMarketer.

Earlier this month a piece of Amazon's internal research leaked, revealing that the retail giant was forecasting it could run out of people to hire in its US warehouses by 2024, as a result of attrition and competition for workers.

And after assessing its own research findings concerning Amazon's slowing retail sales, eMarketer is predicting that the online behemoth's renowned ability to deliver a superior customer experience could be seriously threatened if staffing issues do indeed worsen.

What does the research say?

As first reported by Recode, the leaked piece of internal research uses income and proximity to current or planned Amazon facilities in order to assess the number of available workers.

Despite covering all US warehouses, the research reveals that the issue is particularly problematic in certain areas, with the Phoenix metro area and the Inland Empire of California set to be some of the worst affected.

The issue is exacerbated due to Amazon’s notoriously churn-heavy labour model, which sees the retailer replace the equivalent of its front-line workforce every year.

It is also important to note that this research is from 2021. Since then, the unemployment rate has fallen to 3.6% and Amazon’s Staten Island warehouse staged a successful unionisation effort, which may well lead to others following suit.

Neither of these developments are good news for the online retailer – serving to further complicate an already difficult position.

What does this mean for Amazon’s customer experience?

Amazon has long been hailed as one of the pioneers of modern customer experience. From founder and former CEO, Jeff Bezos’ focus on ‘customer obsession’, to Amazon’s seamless customer service channels – the online retailer’s unparalleled customer experience is a big part of what transformed it from an online bookstore to a trillion dollar business.

However, a big part of what has allowed Amazon to deliver such impressive customer experience has been the sheer size of its one-million-plus workforce, as well as the aforementioned constant churn, which Bezos is reputed to believe helps bolster productivity by not allowing long-serving staff to become complacent. 

Amazon’s unparalleled customer experience is a big part of what transformed it from an online bookstore to a trillion dollar business.

With a labour model that is so reliant on their workforce, it is not a stretch to suggest that an inability to attract enough new recruits combined with the potential increase in departures that could be brought about by ‘the great resignation’, could well result in a significant drop off in Amazon’s customer experience levels.

But is this a new concern, or merely adding to an existing decline?

A new issue or an un-papering of the cracks?

Despite still being considered the gold standard for customer experience in both the UK and US, there have recently been suggestions that Amazon’s position atop the CX mountain is not as secure as it once was.

In an article for MyCustomer written over a year ago, Chris Ward spoke to several CX professionals who provided insights and opinions on areas in which they believed Amazon may struggle.

The professionals highlighted the need for companies to provide more ‘humanised experiences’ as a key development in the future of CX, and argued that this is an area that Amazon appears to be shunning – based on the mothballing of Amazon Mayday and the launch of human-lite Amazon Go stores.

They also pointed to the growing issue of buyers’ remorse, with evidence revealing that consumer conscience is seemingly starting to sway:

“In a survey of UK consumers, 32% revealed they felt extreme guilt after they’d shopped on Amazon, and were ready to move away from the service. Crucially, younger generations “harbour significantly more buyers’ remorse about their Amazon purchases”, with 44% of millennials most likely to feel guilty followed by 42% of gen-z.”

Whilst it cannot be determined whether or not the above issues have had an impact or not, eMarketer is reporting that they expect to see Amazon’s US retail ecommerce sales growth to continue to slow over the next two years. Current projections have it at 9% and 12.3% for 2022 and 2023, down from 42% and 17.8% in 2020 and 2021.

Amazon's ecommerce growth

How will Amazon respond?

As well as highlighting the predicted staffing issues, the research also discussed ways in which the online retailer plans to combat this issue.

These included increasing the starting wage for new transportation and fulfilment workers from $15 to $18 an hour – which was brought in last September – as well as expanded its education and skills training benefits for US employees.

Amazon is also looking to automation to help tackle the issue, with the research referencing the future integration of robots that can safely move large carts throughout warehouses, a robotic arm that can lift and move packages up to 50lbs, and an identification machine that reportedly recognizes packages, eliminating the need for workers to scan labels.

Whilst there is clearly logic to these decisions – the pay increase to attract/retain employees, and the automation to pick up the slack that a smaller workforce will cause – in eschewing the concerns surrounding humanisation and buyers’ remorse, will the CX king risk losing its crown?

 

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Aki Kalliatakis Photo
By aki.kalliatakis1
05th Jul 2022 11:57

At the risk of offending my American friends, (and possibly some in the UK too,) I'd like to make a couple of small comments about your excellent article, Rhys.

First, the world does not end on the borders of the USA, and while many American citizens may be somewhat cynical about Amazon, and the way it treats its employees, the reality is that Amazon has vastly changed commerce for the better in many other parts of the world. My temptation is to say to employees in the USA, "Just get over yourselves." Last time I looked, nobody chained an Amazon employee to their workstation or vehicle, and their are hundreds of millions of people who would be delighted to earn what they earn.

Second, I specifically remember a long-lost article from Fortune magazine in around 2005 that predicted the same for MacDonald's: nobody would want to spend time "flipping burgers" for the rest of their lives. Well, we all know how successful MacDonald's have become, together with many other fast-food businesses.

Third, and arguably most importantly, the fact that the executive team at Amazon are conscious of the impending "crisis" means that once again, they will in all likelihood pull a rabbit out of the hat. I may be proven completely wrong, but I have confidence that they will make sure that their success with customer obsession and CX continues - particularly if Bezos remains in the picture. (CX at Apple, in my opinion, started it's decline after Jobs died, and we have seen this in many other conglomerates too.)

I remain optimistic.

Thanks (1)