Measured by jobs, Amazon.com is one of the bright spots in the long, slow hiring recovery from the 2008 recession: The online retail giant employs 110,000 -- more than Chrysler or DuPont -- many of them low-wage warehouse workers at 96 Amazon "fullfillment centers" in places like the Lehigh Valley, central Pa. and northern Delaware. Hiring has continued, with 500 fulltimers added at Middletown, Del., for a total of 2,000, plus hundreds more in Christmas season, reports the Wilmington News-Journal here.
But Amazon boss Jeff Bezos' comment in his recent annual meeting that the company plans to deploy 10,000 robots by the end of this year -- up from 1,382 at just three of its warehouses as of mid-2013 -- will replace enough workers to save up to $900 million a year, estimates analyst Shawn Milne, in a report to clients of Janney Caplital Markets today. That will enable Amazon to lay off, or not hire, 25,000 workers at $14 an hour, plus healthcare and other benefit.
Milne traces Amazon's reliance on robots to its 2010 $500 million+ purchase of Quidsi/Diapers.com, the automated retailer set up by Bucknell University graduate Mark Lore. Quidsi used robots from Massachusetts-based Kiva Systems Inc., which Amazon bought in 2012 for $775 million.
It's tough to fit robots into existing centers. Amazon has been slowing down its new warehouse construction, and testing robots carefully, Milne notes. There are limits to what robots can do; they cost around $25,000 per bot, or $1M-$20M per warehouse for a full set. But for high-volume, all-year items, robots can save 20-40% off the cost of humans handling the same boxes, Milne adds, citing industry sources.