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Labor shortages at Amazon hamper one-day delivery ambitions

An Amazon delivery person pulls a delivery cart full of packages during its annual Prime Day promotion in New York, U.S., June 21, 2021. REUTERS/Brendan McDermid

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LOS ANGELES, Oct 28 (Reuters) – Labor shortages have jeopardized Amazon.com Inc’s (AMZN.O) plan to set the standard for one-day delivery for its loyalty club members Prime, thus delaying its attempt to consolidate its lead in e-commerce. and shipping costs increase before the all-important holiday season.

The comments from the world’s largest online retailer come as staffing emerges as a significant issue for US retailers, who are already battling supply chain issues, product shortages, rising inflation and soaring transport costs.

Seattle-based Amazon said it expects $4 billion in additional labor and related expenses in the fourth quarter amid pandemic-fueled shortages that have made it harder to hire warehouse workers and drivers, and forced him to deliver packages to remote locations. warehouses with enough staff.

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In April 2019, Amazon announced it would be rolling out one-day delivery for Prime subscribers, and it said it would cost the company $800 million in the second quarter of 2019 alone. Faster shipping has forced Walmart Inc (WMT.N) and other retailers to speed up delivery and invest in e-commerce offerings, boosting competition.

Amazon continues to charge $119 per year for a US Prime membership, which includes shipping.

On Thursday, Amazon Chief Financial Officer Brian Olsavsky said, “We have unfinished business on the one-day promise side. We accelerated that nicely in 2019 and the first quarter of 2020 before the pandemic hit,” he said. he said, referring to One Day Delivery. “We still haven’t returned to the levels we saw before the pandemic.”

Olsavsky said labor constraints “didn’t help us close the gap” in offering Prime customers one-day shipping by default, but the company was hoping for an improvement next year.

‘CAN’T CONTROL IT’

As shoppers begin to spend on entertainment and travel again, Amazon faces fierce competition not only for share of wallet, but also for employees.

Michael Pachter, an analyst at Wedbush Securities, said Amazon had no choice but to pay workers because it needed warehouses near high-cost city centers to ship goods within a day to customers. near.

“Their sales are in population centers, which basically means they have to pay competitive wages,” he said. “They really can’t control it. The pattern is, order from Amazon and you’ll get it soon.”

Companies in the retail sector are also struggling to find workers to do physically demanding work in warehouses, especially when restaurants, stores and entertainment venues rehire. In New York, some Amazon warehouse workers are pushing for more wages and protections through a possible union vote.

Drivers are also in demand.

This week, three Amazon Delivery Service Partner (DSP) drivers told Reuters they had managed to secure a higher salary. Two used FedEx offers to demand more from their existing DSP employers. Another driver hopped on United Parcel Service (UPS.N), a union shop known for having some of the best pay and benefits in the industry.

Amazon previously said it plans to add 150,000 seasonal jobs in the United States, where the lures for warehouse workers and other roles include an average starting salary of more than $18 an hour and signing bonuses of up to $3,000.

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Reporting by Lisa Baertlein in Los Angeles; Editing by Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

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