Automation and Amazon: How They Could Affect the Grocery Business

Whole Foods acquisition could boost unionization efforts

Allen Smith, J.D. By Allen Smith, J.D. July 27, 2017
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Automation and Amazon: How They Could Affect the Grocery Business

​What does Amazon's recent acquisition of Whole Foods Market mean for the grocery chain's workers? Industry observers think Amazon's penchant for automation could lead to more unionization efforts and potential layoffs at the natural foods retailer. But both companies' histories of strong opposition to unionization and  Amazon's rapid automation itself are likely to defeat union-organizing attempts, according to Mark Neuberger, an attorney with Foley & Lardner in Miami.

"No job reductions are planned as a result of the deal," an Amazon spokeswoman told SHRM Online.

However, Gary Hawkins, CEO and founder of the Center for Advancing Retail and Technology, a nonprofit in Los Angeles that focuses on innovation in retail, predicted the merger ultimately "will result in layoffs. People are to some extent at risk."

Marc Perrone, president of the United Food and Commercial Workers International Union (UFCW), sent a letter in mid-July to the Federal Trade Commission (FTC), asserting that letting Amazon buy Whole Foods would result in "job-destroying automation" and calling for careful review of the merger. On July 24, the union filed a complaint with the FTC to stop the acquisition, saying Amazon's purchase of Whole Foods would trigger store closures, The Washington Post reported. "Amazon's reach will ultimately reduce the number of grocery competitors that consumers can choose from," the complaint said. "Regardless of whether Amazon has an actual Whole Foods grocery store near a competitor, their online model and size allows them to unfairly compete with every single grocery store in the nation."

Grocery Industry Rapidly Overhauled

Amazon's purchase of Whole Foods was announced June 16. "I don't think we'll see anything happen right away in the first six to 12 months," Hawkins said. "But I think during that time Amazon will be moving quickly to evaluate all activity across Whole Foods' supply chains, operations and how products are moved to the store and to the shelves to look at what areas automation could be applied to lower costs."

[SHRM members-only toolkit: Managing Downsizing by Means of Layoffs]

Grocers have been slow to move their business online, he said. However, "Amazon's acquisition of Whole Foods has thrown the industry into a frenzy."

At the Amazon Go store in Seattle, which opened last December, customers don't have to go through checkout because store technology detects when products are taken from or returned to shelves and keeps track of them in a virtual cart. When done, customers just leave the store. Their Amazon account is charged, and they are sent a receipt. According to USA Today, Amazon Go is open only to Amazon staff while technical bugs are worked out.

"Amazon has no plans to use the technology it developed for Amazon Go to automate the jobs of cashiers at Whole Foods," an Amazon spokeswoman said.

"Eliminating cashiers and all help in the store is a long way off yet," Hawkins said. However, he noted, "robotics for store-level activities are being developed." And, he said, companies are "seeking to apply automation where people don't add any value. If a machine can do it as well as a human being, Amazon and lots of other companies say, 'Let's use the machine.' " He predicted, "Amazon will use people where they add the most value: interacting with people, talking about where the beef is from, explaining how to prepare seafood, that type of thing."

Less Unionization Possible

Amazon may transfer a more automated distribution system into Whole Foods, said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis. If, as a result, there are significant job losses or wages are lowered, employees may feel like they need to unionize, he said.

But automation doesn't automatically result in layoffs, Pryzbylski noted. And if automation results in company growth, automation can be a job creator.

However, "increased automation may also lead to less employees under one roof and dispersion of those employees, which would also make it more difficult to organize," Neuberger said.

Whole Foods has a record of paying employees above the market rate, which Pryzbylski said is one of the reasons it has not been unionized. The grocery industry is heavily unionized—8 percent to 13 percent in most states, compared with 5 percent in retail and 6.4 percent in the private sector.

Whole Foods, Wal-Mart and Trader Joe's are the three main grocery chains whose retail clerks aren't unionized, said Doug Bloch, political director with Teamsters Joint Council 7 in San Francisco. Retail clerks are under the jurisdiction of UFCW, he said. Distribution is in the jurisdiction of the Teamsters, who deliver to all three stores, he said.

All distributors of food to Whole Foods work for United Natural Food Inc. (UNFI), and some of these distributors are organized by the Teamsters.

"Amazon warehouse fulfillment centers are automating very rapidly, and we're going to have to wait and see how much spills over into Whole Foods," he said. Amazon has announced that it intends to soon fill 50,000 new positions—mostly at company warehouses—as part of its pledge to hire 130,000 full- and part-time employees by mid-2018, according to The Wall Street Journal. If Amazon brings some of its food distribution in-house instead of using UNFI distributors, there might be less unionization, he noted.

"Automation is hitting this industry on the distribution side," Bloch said. It's coming with autonomous vehicles and is already happening in grocery stores with self-checkout, he noted. "Automation is the larger threat. It is inevitable. Workers who have a union are much better positioned to protect their jobs than workers who don't," he said.

 

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