Amazon is getting ready to take over the retail industry, replacing labor with technology, and make minimum wage irrelevant.
At Amazon Go stores—a new chain of convenience stores to be rolled out in 2017—there will be no floor employees to assist customers, no store greeters, and no cashiers to collect payments. They will all be replaced by technology, which monitors customers entering the store, records what they buy, and ensures that they are charged the appropriate amount (that's according to a video release, though it was denied by an Amazon spokesperson).
While the primary driver behind Amazon’s new store concept is to speed the shopping experience by cutting down the long lines usually observed in convenience stores, cutting labor costs is also a factor. Amazon usually operates at razor thin margins, and cutting an employee or two can make the difference between making and losing money.
Amazon’s announcement comes shortly after McDonald’s (NYSE:MCD) announced that it would be replacing cashiers with ordering kiosks. McDonald’s is also another company that operates at low margins; at least its franchises are, as the fast food market is highly competitive.
| Company | Amazon.com (NASDAQ:AMZN) | Wal-Mart Stores |
| Forward PE | 83.24 | 16.32 |
| Margin | 1.64% | 2.98% |
| Operating Margin | 3.16% | 4.79% |
| Qrtly Revenue Growth | 29.02% | 0.70% |
| Revenue (ttm) | 127.99B | 484.60B |
Source: Finance.Yahoo.com 12/2/2016
And the two companies are hardly alone. Wal-Mart, Target, and Panera Bread have been using technology to replace labor that is usually paid the minimum wage.
That’s certainly a setback for the Fight for $15 minimum wage movement, as it makes the movement irrelevant, too. In fact, the movement may have helped Amazon, McDonald’s and the like to speed up the replacement of workers who are now more expensive than machines, which usually become more efficient and less costly over time.
The trend is expected to accelerate, as America moves towards a $15 minimum wage, completely eliminating the need for cashiers and other dispensable employees.
And it’s sad news for people earning a living from this occupation.
But that’s the reality of a highly competitive world where technology drives progress and pay.
While mandates like the minimum wage help low paid workers bring home a higher pay in the short term, they send these workers to the welfare lines in the long term, as companies replace labor with machines.
That’s how a good cause turns into a bad one.
