Amazon auditions to be ‘the new Red Cross’ in Covid-19 crisis | Free to read
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Jeff Bezos did not build the Amazon empire with social distancing in mind.
At a facility in Texas last week, employees entered the break room to discover most of the microwaves had been removed in an attempt to stop people congregating as they heated their lunch and reduce the risk of contracting coronavirus.
“Everything takes much longer,” says Peter, a worker at the warehouse. “People are all over each other.”
The tables, big enough to accommodate four, are now strictly for one person. To ensure staff have enough time to practise social distancing, lunch breaks have been increased — by five minutes.
“The only thing that they seem to care about is productivity,” says Peter.
Last week Amazon provided him, and his colleagues, a letter to give to police in the event they are stopped while trying to get to work.
“The employee is providing essential work to support Amazon’s delivery of critical supplies,” the letter reads, “allowing members of the community to remain at home.”
Keeping employees like Peter healthy and at work is what stands between Amazon’s finest hour, or the breakdown of the most sophisticated logistics ecosystem ever created.
The potential perils for Amazon are enormous. Before the onset of the pandemic, the company was already facing scrutiny from regulators and politicians about its market power. If it is seen to be pushing employees to take excessive health risks during the crisis, the political pressure will intensify.
New York’s attorney-general Letitia James has already called for an investigation over the “disgraceful” firing of Chris Smalls, a worker who on Monday helped organise a walkout at a facility on Staten Island, New York. Amazon said Mr Smalls was guilty of “violating social distancing guidelines and putting the safety of others at risk”, having been told to quarantine at home.
However, if it can keep its operation intact, investment analysts predict Amazon will emerge stronger and more powerful than ever, just as Ford and General Motors cemented their position as all-American corporations by helping the second world war effort.
Amazon could become a company admired for keeping housebound citizens healthy, fed and watered — acting at times as though it were an extension of the emergency services.
“Every crisis has got villains, victims and heroes,” says Eric McNulty, an expert in crisis leadership at Harvard University. “Right now, it’s pretty clear that the virus is the villain and Amazon has a chance to be the hero. The moment is right to do a really good thing.” But, he adds: “They could end up the villain if they wind up putting people in harm’s way.”
As the extent of the challenge has become clear, Mr Bezos, the chief executive, decreed in mid-March that only essential goods — medical supplies and household staples — would be allowed into its warehouses. It would mean, temporarily, cutting off everything else from the “everything” store.
“I get it,” says James Thomson, a former Amazon manager who now advises third-party sellers. “Amazon is the new Red Cross.”
Amazon needs about 270,000 workers to turn up each day to keep its US logistics operation running smoothly, according to logistics expert Marc Wulfraat. “It’s a huge number of people to report to work, given the situation,” he says. Globally, the company’s entire workforce totals 800,000.
“We don’t yet know how severe it is,” he says of the probable impact of coronavirus in the US, but he points to the hardest hit parts of Europe, where staffing levels are estimated to be down about 30 per cent, for signs of things to come. “If that’s the case, they need to hire an additional 100,000 people.”
That effort is under way. On March 16 Amazon announced it planned to employ 100,000 additional workers across North America and Europe in just a matter of weeks, recruiting some of those recently laid off or temporarily out of work. As part of the move, Amazon said it would also up its US rate of pay from $15 to $17 an hour. Later, it increased overtime payments, too.
But as demand surges, the cracks have started to appear. Amazon customers shopping in the past week have been told the earliest they can expect to receive some items is by the end of April — or in some cases not at all.
Others found popular items, such as hand sanitiser or respiratory masks, marked up by more than 2,000 per cent. Almost 4,000 third-party sellers have been kicked off the platform for price gouging, Amazon says, accounting for tens of thousands of listings.
Users of Prime Now and Amazon Fresh — the sub-two-hour delivery services, used mostly for groceries — are being warned stocks are in short supply, and delivery windows are much longer than usual. Prime Pantry, another option for non-perishable foods, has been shut down, as have many of Amazon’s bricks-and-mortar stores.
Apart from Whole Foods, the organic food retail chain it acquired in 2017 for $13.7bn, Amazon’s food infrastructure is in its infancy. Faultlines here are natural, analysts say, for a company that has been built around shifting books and other objects, rather than apples and oranges.
To combat this, Amazon has in the past week tried to tempt some of its warehouse workers into fulfilling door-to-door grocery deliveries instead, offering an additional $2 per hour on top of the extra $2 already added. A leaflet pitched the opportunity to workers as a chance to be “exposed” to other areas of Amazon’s business.
Amazon’s logistics network, a marvel of efficiency and autonomy, has expanded rapidly in recent years as it doubled down on a strategy of reducing delivery times for customers who paid a $119-a-year Prime membership fee. Amazon’s ability to offer one-day delivery for Prime subscribers in the US was heralded by investors as a triumph, and was credited with driving the company’s market capitalisation over $1tn in February. Today its value is over $950bn.
Globally, Amazon says it now utilises 277m sq ft of floor space for logistics, not including its corporate offices or cloud computing data centres — a more than 80 per cent increase since the end of 2016. A further 60m sq ft is expected to be added in the next 18 months.
Much of that growth is to support the company’s “last mile revolution”, referring to the final steps that take a package to a customer’s door, the most expensive stage of the ecommerce process. As Amazon sought to wean itself off FedEx, in 2017 the company began setting up almost 200 delivery stations across the US. Unlike the huge fulfilment centres, these stations could be situated much closer to communities, and can handle as many as 120,000 packages a day.
It was in a delivery station, in Queens, New York, where the first case of coronavirus within Amazon’s US infrastructure was confirmed on March 18. Workers staged a walkout, but the facility was back up and running less than a day later.
At least 26 more cases of Covid-19 have emerged, spread across 13 other states, according to voicemail messages received by employees from their line managers, and verified by the Financial Times. One facility, a large warehouse in Kentucky, has been shut down at the request of the state’s governor after at least three cases were discovered. Amazon says the closure has “no impact” on deliveries of goods in the area.
The US cases follow a pattern already well established in Europe. It has been just over a month since a branch of Italy’s largest union asked Amazon to protect 1,600 workers at a warehouse based in Castel San Giovanni, only half an hour’s drive away from the town of Codogno, the country’s first major cluster of coronavirus infections.
Massimo Mensi, a local representative of Amazon Global Alliance, an international network of labour unions, says workers were not being given masks. “Amazon has said it needs more time, but we have continued pressing them because there is no time — people are dying,” he says.
Workers in Amazon’s Castel San Giovanni warehouse were until Friday on strike for two weeks. They returned to work after being allowed to set up an internal health and safety committee. Two other large centres in the town of Passo Corese near Rome and the northern municipality of Torrazza Piemonte near Turin are threatening to strike.
Christy Hoffman, general secretary of international federation UNI Global Union, says there have been cases of Amazon workers contracting coronavirus in Italy and Spain. “They are not always closing warehouses to disinfect, but more worrying is that Amazon is not creating work conditions where people can respect rules to stay at least one metre away from each other,” she says.
Although Amazon has offered two weeks of paid leave to workers who contract Covid-19, Ms Hoffman argues there is no incentive for workers who feel ill but cannot immediately be tested to stay at home.
The next pressure point for Amazon is likely to be the UK, which last Monday went into lockdown and hosts the most Amazon warehouses outside of the US.
Mick Rix, national officer at the UK’s GMB Union, says he wrote to Amazon three weeks ago demanding emergency procedures be put in place to protect its roughly 30,000 employees and 25,000 contractors in the country, without hearing back. “Amazon refuses to recognise trade unions and they will not communicate with us,” he says.
Workers required by Amazon each day to keep its US logistics operation running smoothly. Its global workforce is about 800,000
277m sq ft
Amazon’s global floor space for logistics, not including corporate offices or cloud computing data centres, a rise of over 80% since end-2016
US ‘delivery stations’ which handle the ‘last mile’ of shipments to customers. Some can handle as many as 120,000 packages a day
Amazon has so far declined to comment on the true severity of the coronavirus spread, other than to confirm specific cases discovered by the FT using internal sources, social media posts and other news outlets. Its policy is to only directly inform workers who had been on the same shift as a sick employee, leaving the rest of that location’s workforce, and the wider public, in the dark.
Whether or not a person is sent home can also be decided using security camera footage, according to a memo sent to staff at a warehouse in Houston, Texas, after a worker there was diagnosed with coronavirus.
“We determined via camera footage where the individual last worked and sanitised that area in addition to our current cleaning procedures,” the memo, seen by the FT, read. “Also, we find any person who was closer than 6ft to that individual for more than 15 mins and reach out to those individuals for a [check-up].”
It was concerns for their safety and anger at a lack of information that led Mr Smalls and other workers to walk out at the Staten Island facility on Monday. “Amazon’s inaction has left workers with no other choice but to walk out of a potentially unsafe work environment to protect their own and everyone’s health. Enough is enough,” says Dania Rajendra, director of Athena, a US workers rights’ non-profit group.
The extent to which coronavirus within Amazon facilities presents a health risk beyond the company’s walls is unclear. A study published in The Lancet suggested it may be possible for Covid-19 to survive on cardboard for 24 hours, and other surfaces for longer.
More problematic is transmission via the delivery drivers currently handling about 1,000 packages a week each. “We use a different van every day,” says Joey, a driver who works for an independent Amazon distributor in southern California, adding that drivers do not have “enough wipes to clean, or the right gloves”.
As demand has increased because of coronavirus, he says he is typically making 150 stops on his shift. “Nobody is complaining about the work,” he adds. “Just give us the equipment we need.”
Amazon has said it is taking “extreme measures” to keep its facilities safe: increasing distance between warehouse employees, loosening security processes to speed up movement, eliminating stand-up meetings — all moves corroborated by several employees.
But staff report a desperate scramble to comply with the orders. “When we put down social distancing markers on the floor,” says John Hopkins, a worker at a delivery station near San Francisco, “the guy doing it didn’t even have a tape measure — he was just eyeballing it. With the number of people in there yesterday I don’t think it’s even possible for compliant social distancing to occur.”
To make sure lower level managers have complied with directives, Amazon has been surveying workers directly at their workstations via the monitor used to display productivity quotas and other data. Last week they were asked: “Do you still participate in group meetings in person?”
Amazon says its “leaders” are meeting every day to monitor the situation and are “consulting with medical experts to ensure the safety of our sites, employees, partners and customers”.
The company says it is “supporting the individuals” who have been diagnosed with Covid-19, and told those who may have been in close contact that they are allowed to stay at home on full pay.
But in a letter to employees, Mr Bezos did acknowledge a lack of safety supplies. “We’ve placed purchase orders for millions of face masks we want to give to our employees and contractors who cannot work from home,” he wrote. “But very few of those orders have been filled.”
He added: “I’m sad to tell you I predict things are going to get worse before they get better.”
If and when things do start to improve, analysts say Amazon is positioned to win big. Consumers will have had their day-to-day habits changed by coronavirus lockdowns — accelerating adoption of ecommerce among older demographics, particularly for groceries and other essentials.
“For the older generation, the pharmacies and the grocery stores have been part of a routine where they go out and engage with other people and see other people,” says Jefferies analyst Brent Thill. “And I think that dramatically changes going forward.”
In a Jefferies study of US consumer habits conducted last week, 34 per cent of respondents said they were spending more on Amazon since coronavirus hit — with health supplies and household goods seeing the biggest rise, followed by groceries.
Coronavirus may also serve to hasten Amazon’s ambitions in healthcare. In Seattle, Amazon Care — the division which typically handles internal staff needs — is working with a Gates Foundation-backed initiative to distribute Covid-19 testing kits to residents. A similar scheme is planned in the UK. The moves build on its 2018 acquisition of online pharmacy PillPack.
“A surplus of fast, effective, easy-to-access test kits would flatten the curve and protect people around the world,” wrote Mr Bezos on Instagram on Thursday, after holding a video call with the World Health Organization’s director-general.
With the US Federal Trade Commission investigating Amazon and other big tech groups over the extent to which they harm competitors, Mr Bezos has an opportunity to change the political conversation surrounding the company.
William Kovacic, a former head of the FTC now at George Washington University, says the crisis will probably magnify the debate about whether the economy depends too much on a handful of companies.“[If] Amazon now steps forward and serves as a true patriot, that casts the company in a better light in the eyes of legislators who have been pressing them,” he says.
But, Prof Kovacic adds: “Amazon’s extraordinary significance will attract more attention.”
To protect the identity of Amazon workers, who are not authorised to talk to the media, some names, and other potentially identifying details, have been changed.
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