Amazon workers strike in Germany over the changing nature of retail

The current labour dispute Amazon is experiencing in Germany illustrates just how different the company is compared to other internet-based giants. With its colossal logistics infrastructure comes quite distinct issues such as how to manage a large, but often indifferently paid workforce.

Approximately 1,500 of Amazon’s warehousing staff at its logistics facilities across Germany have staged a one-day strike over pay levels in what the Ver.di union described as a “warning strike”. Essentially, the staff and the company are arguing over the definition of their jobs. The workforce is looking for parity with retail workers who, in Germany, have higher agreed wage levels than logistics workers; which Amazon wishes to define its staff as. There also appears to be a wish for better job security for employees at the Bad Hersfeld and Leipzig hubs, many of whom are temporary staff.

It is interesting that the Ver.di union describes the dispute as being driven by arguments over the definition of what Amazon actually does. The company wants to exploit the fact that so much of its activity takes place in warehouses. This enables it to adopt not just more efficient operations, but also to utilise cheaper labour, something that Amazon describes as “modernisation”.  An aspect of this is the wish to reflect the seasonal nature of demand at the company by making many workers’ contracts temporary. Unsurprisingly, the workforce appears to resent this.

Yet, this conflict is hardwired into Amazon’s business model, with its wish to benefit from substantial economies of scale through the centralisation of inventory and warehousing operations.  In essence, a large part of the retail sector is being shifted to a business model characterised by much lower costs. One element of this change is the more efficient use of land and inventory, but also includes the opportunity to decrease employee unit labour costs as workers in fulfilment centres can be controlled and worked much harder than staff in traditional shops.  It is a strong example of how information technology and logistics management are yet again being combined to strip-out manual labour costs.

It may be the case that Amazon’s sheer scale is also part of the problem. Amazon may have to learn a lesson that many of the big retailers it is seeking to replace realised several decades ago. If you want a very large workforce that is also stable, you may have to shoulder higher rates of pay.