How Amazon Destroys Hundreds of Thousand of Jobs
Macy’s Inc. (NYSE: M) will close 100 stores in early 2017. In total they probably employ something like 20,000 people. It has closed a number of stores already. The numbers at Gap Inc. (NYSE: GPS) are worse — 175 stores. The list of layoffs by traditional retailers stretches ever longer. Almost every company blames e-commerce, which indirectly means Amazon.com Inc. (NASDAQ: AMZN).
Amazon is a model of efficiency. Its revenue will be well above $100 billion this year (a small amount of which will come from cloud operation Amazon Web services) with 230,000 workers. Macy’s has 150,000 before its layoffs. Macy’s will be lucky to have revenue of $25 billion in 2016. And it will be lucky to make more than a tiny amount of money.
Layoffs across the brick-and-mortar retail industry have begun but are not nearly over. E-commerce sites attached to each of these companies are modest in terms of revenue production and only a small fraction of total sales. In many cases, retailers do not even break out e-commerce sales numbers. They are too pathetic and would alarm shareholders more than they have been alarmed by store revenue.
Even giant Wal-Mart Stores Inc. (NYSE: WMT), with its outsized store system, revenue and balance sheet, has had to resort to M&A to buttress e-commerce, as it bought Jet.com for $3.3 billion. Still an immature company, Jet.com is far from proving it can help Wal-Mart in any substantial way.
Scattered across the industry, other giants are in deep trouble and will have to continue closing stores. First among these is Sears Holdings Corp. (NASDAQ: SHLD), which owns Sears and Kmart. It has closed stores already, but its revenue continues to contract. There is no chance it can continue to support its 178,000 workers. As it shutters stores, the layoffs almost certainly will be in the tens of thousands.
The critical holiday shopping season is a little more than 100 days away. In some cases the holiday season drives 100% of a retail company’s profits. Whatever happens to retailers this year, it could get worse after the first of next year.