Amazon’s 2021 will shape its messaging in 2022.
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You’ll likely hear a lot in 2022 about Amazon being a great place to work and a business that guarantees low prices for customers and delivers with lightning speed. A look back at 2021 explains why the e-commerce giant is so anxious to get those messages out.
Amazon began and ended the year fighting a unionization movement at its Bessemer, Alabama, warehouse. Workers rejected unionizing in an election this spring. But a federal labor official recently ordered the result thrown out because Amazon allegedly interfered in the process. Amazon is expected to appeal.
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The union vote was by no means the only dramatic event in Amazon’s 2021. In February, company founder Jeff Bezos announced he would step down as CEO. In July, Andy Jassy, a longtime Amazonian, replaced Bezos as the company turned 27 years old. In October, Amazon posted falling profits for the first time in years, unable to maintain a streak of meteoric earnings reports because costs for labor and warehouse operations had shot up.
After the US Senate confirmed Lina Khan, an antitrust reformer, to chair the Federal Trade Commission, Amazon preemptively tried to get Khan off its case in anticipation of accusations of illegal monopoly practices. On a lighter note, Amazon rolled out a new home surveillance robot, Astro.
The company says it’s fair and generous to its workers and that its low prices are good for consumers. And it’s worth noting that customers seem to like the company regardless of its controversies.
Amazon gave a detailed response for this story, saying that it’s a force for good both for workers and consumers, and that the arguments it’s breaking antitrust law fall flat and that.
“Every day we empower people to find ways to improve their jobs, and when they do that we want to make those changes — quickly,” Amazon spokesperson Barbara Agrait said in an email, adding the company doesn’t believe unions are the right approach for its employees. Agrait also said suggestions the company is a monopoly are misplaced.
Amazon will likely beat its drum loudly as the stakes rise. Here’s a look at how Amazon handled worker discontent, the slide in profits and the threat of a regulatory crackdown.
Employment struggles
Amazon’s labor pains go beyond the union effort at the Alabama warehouse. Activists are trying to form a new union in the New York City borough of Staten Island, possibly next year. The US National Labor Relations Board, which enforces federal labor law, has reviewed multiple claims that Amazon retaliates against workers who organize walkouts. The board has the power to conduct a broader investigation if it suspects a pattern.
The labor organization movement comes amid a shortage of Amazon workers that’s weighing on the company as it expands. Worker scarcity and public complaints have prompted Amazon to include a new value — “Strive to be Earth’s best employer” — to its list of 14 core principles.
In both media statements and recruiting ads for its warehouses, Amazon has emphasized its starting wages that average more than $18 an hour, health insurance, and tuition programs for college degrees and certificates. A recent Wall Street Journal article found that Amazon, which has become the country’s second largest employer despite high levels of churn at its facilities, has been pushing wages higher in competing businesses around the country.
Amazon said it was disappointed in the recent ruling. The company’s statement didn’t address the NLRB’s finding that it violated labor laws. Amazon will likely appeal later this month.
Generally, the company has also softened its public comments, backing off an aggressive tone it had taken with politicians and other critics. (After a bizarre series of tweets, Amazon had to acknowledge that a complaint by Rep. Mark Pocan about delivery drivers being so harried they have to pee in bottles was accurate.)
The company now emphasizes it isn’t perfect but wants to get better. In public appearances, Jassy has said Amazon could do more for its workers. He’s also acknowledged that its HR systems made taking leave and returning to work chaotic for employees after the company implemented COVID policies.
Making money
Amazon will have a hard time returning to the level of profitability it reported in the first 18 months of the pandemic, when homebound shoppers turbocharged its revenue. The company attributed low profits in the third quarter of 2021 to a break in the pandemic that let people get out of the house rather than have stuff delivered. Amazon also faced rising costs that cut into its margins.
The company doubled its operations facilities during the pandemic, adding hundreds of new warehouses and air hubs to handle a huge influx in e-commerce orders. But some facilities weren’t fully staffed as of the fall, Amazon Chief Financial Officer Brian Olsavsky told investors in October, which meant products had to be moved around to locations with workers that could process them. These problems will continue to be costly during the holidays, he said.
The cost of recruiting and maintaining a workforce has also increased, with Amazon offering higher wages and signing bonuses to attract workers as they aim to hire an extra 150,000 workers for the holiday season.
Amazon’s profits might not be hurt as much by these increasing costs as much in the holiday shopping season, when many companies make the bulk of their sales. However, some of the costs are likely to persist after the shopping fervor dies down.
Since it was founded, Amazon has eaten excess costs, including the cost of shipping, to keep prices low. The past year has been a good example of this business philosophy, with Amazon embracing the higher shipping costs involved in moving products around more between its facilities (sometimes using expensive air freight, something retailers everywhere are relying on more). Executives have said those higher costs won’t lead them to make up the difference by raising prices for consumers.
Antitrust fights
Amazon wants to be the online retailer with the lowest prices on the internet. So it might seem counterintuitive that critics say the company forces e-commerce prices up in general. The argument comes from antitrust reformers who say Amazon has the lowest prices only because it bans sellers from posting lower prices on other websites.
Karl Racine, the attorney general of the District of Columbia, testified Tuesday before the Senate Finance Committee, saying Amazon punishes third-party sellers who sell their goods for lower prices on their own websites or in other online marketplaces. The sellers’ listings may lose the “buy now” express checkout button, and they may even be kicked off Amazon.
Critics argue that it can be more expensive to sell goods through Amazon, which takes a cut of sales through referral fees in addition to advertising fees. Sellers say paying for advertising has become necessary to make sure their products are placed high enough in customers’ search results. If it costs less to sell on a company’s own website or another marketplace, critics say, Amazon shouldn’t stop the companies from posting their goods at a lower price on those sites.
Racine is suing Amazon in federal court for antitrust law violations. Amazon argues Racine has it backward. The company says that like other retailers it reserves “the right not to highlight offers to customers that are not priced competitively.” If Racine is successful, Amazon prices might rise, it says.
The lawsuit could be just the beginning. Prior to becoming FTC chair, Khan made extensive arguments for why Amazon could be ruled an illegal monopoly, and the agency is actively investigating the company on multiple fronts.
Amazon has asked for Khan’s recusal from proceedings involving the company, alleging she’s shown bias against Amazon. Though legal observers say that’s unlikely to happen, Amazon appears ready to fight any potential decision from Khan as unfair.
Correction at 10:18 a.m. PT Dec. 10: In February, Jeff Bezos announced he would step down as CEO later in the year.
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