COVID-19 puts fresh focus on back end working conditions at e-commerce retailers

Profile picture for user slauchlan By Stuart Lauchlan July 23, 2020
Summary:
Warehouses and distribution centers are the 'engine rooms' of retail e-commerce, but in recent months have also become the focus of fresh COVID-19 controversy.

retail
(Pixabay)

The importance of the unseen back end to e-commerce operations is a topic we’ve returned to several times at diginomica, but the events of recent months have brought this back to the fore. The COVID-19 crisis has seen a massive uptick in online commerce across multiple, if not all, retail sectors, but behind the convenience of the front end experience for locked down consumers lie warehouse and distribution center operations that have become focal points for controversy. 

Last week the Associated Press ran a story about a woman called Jana Jumpp, a former Amazon warehouse worker, who now spends her day tracking and “figuring out” how many of the firm’s staffers have become sick from COVID-19. She’s pulling in data from social media to come up with an unofficial number, declaring: 

Amazon is not going to do it, so it’s up to us.

In a similar move, labor activists at United for Respect are collating anonymised reports and messages from staff at both Amazon and Walmart to come up with its own tracking numbers. It’s all reflective of how much more controversial staffing conditions in the ‘engine rooms’ of e-commerce have become in recent months, even leaving aside the longer-term debates around working practices and wages. 

A case in point was seen recently in the UK with online retailer Boohoo, owner of the Pretty Little Things, Oasis and Warehouse fashion brands, which has been accused of not offering COVID-19 protection to workers in its Leicester factory, which was also said to be operating during a localised lockdown in the city. 

Labour Behind the Label, a workers' rights group, has separately claimed that the firm has not lived up to its responsibilities: 

Boohoo has been operating throughout the crisis and has stopped responding to our requests for details of their measures to protect workers during the COVID-19 crisis…In Leicester’s garment factories however, Labour Behind the Label has received reports that workers have been told to come into work – even when they showed symptoms of COVID-19 – otherwise they would lose their job. We have heard of several incidents, whereby workers who had tested positive were told to come into work, and of managers telling workers not to tell anyone else about positive cases. 

It adds: 

The government has made recommendations and guidelines for employers to operate during the crisis. However, the government has shifted responsibility onto individual employers and workers for enforcing employment standards and new guidelines. In a situation where big brands are pushing orders through, many manufacturers may feel that they have to circumvent the guidelines in order to remain in business and continue to get future orders. It is remarkable that the authorities assumed that garment factories in the UK and especially in Leicester, would all provide proper PPE and comply with social distancing, as it is well known that many have been proved unable to enforce minimum wages and basic working conditions in normal circumstances. 

For its part, Boohoo has committed to an “immediate independent review of UK supply chain”, led by Alison Levitt QC, to focus on supplier compliance with COVID-19 regulations as well as other working conditions. 

In the US, Amazon has spent months fending off criticism about its alleged treatment of warehouse workers. The retailer has now reportedly told staff in two states that they’ll be screened for virus symptoms when they show up to work and will be be asked to go home if they test positive. The company had already put in place a program of checking temperatures and requiring face masks at warehouses since April.

As for Walmart, CEO Doug McMillon recently told the firm’s shareholder meeting that the world’s biggest retailer has put in place the right measures to protect workers: 

We've done a number of different things including trying to create an environment where associates that shouldn't come to work, don't, whether they feel uncomfortable, might not be feeling well, have a pre-existing condition. We created a three tiered leave policy. And we're happy to report that since it's been established more than 270,000 associates have accessed that leave policy and taking advantage of it. That gives us some confidence that it's been effective that it's so important that those that are uncomfortable don't come to work….We’ve shipped during the crisis to the US alone more than 110 million masks to our associates and stores, clubs, distribution centers, fulfillment centers.

He added: 

As [the pandemic] was starting in the beginning, we were getting really good ideas from our associates as it relates to what we could do. And as far as I can remember, we implemented all of those. And as of late, for more than a month now, folks have had a hard time coming up with additional things that we can do. But if we come across any more ideas to help keep them safe, we'll certainly consider those and most likely do them.

Price to pay 

All of this does come at a cost to the digital retail suppliers of course. At ASOS, CFO Mathew Dunn recently explained how his firm has put in place its own safeguards to ensure “effective social distancing in our facilities:”. This was done in collaboration with The Community Workers Union and Barnsley Council: 

Our warehouses are automated and mechanised, which results in people being congregated in certain high density areas such as pack benches, for example, so we had to go beyond just increasing the distance between people and this took some time to implement. It was exacerbated further in the by the border closure between Germany and Poland which restricted a number of our workers from being able to to attend work.  We took a number of customer-facing decisions to avoid stimulating demand we couldn't effectively service to ensure we didn't disappoint customers and also ensure no one was tempted to take undue risks across our supply chain. 

All of this has had an impact on operations, he added: 

As a result, next day delivery was turned off for seven weeks out of our UK warehouse and five weeks out of the [ASOS] Euro Hub. We also added up to 11 days to a standard delivery proposition, something we were up front with our customers about before the point of order. Our capabilities here are the cornerstone of our customer proposition and we are clear that open and transparent. Communication is key to building trust with this generation and our customer base. We kept them updated on the changes we were making and how we were prioritising health and safety.

The firm is now investing a further £5 million of incremental CapEx to ensure workers are safe as it scales back up to peak capacity, he explained, another cost of the past few months: 

As we've taken the social distancing measures, that has had an impact on the cost in our warehouse. That's to do with the staggering of shifts, that's to do with the incremental cleaning we're doing. So there's quite a lot of incremental costs going in there and  there will be some further incremental costs to go in and we're seeing that as costs continue for some time.

One solution of course is increased automation of back end operations, a point made by Ocado CEO Tim Stainer earlier this month: 

Our facilities also let themselves naturally to social distancing, the automation allowing all of our people to work more than two meters apart safely… it's important to understand that 50% of the human capital inside a warehouse is picking, transforming that to robotic pick would enable everybody working inside those warehouses to be twice as productive. And then we could continue to work on automating further processes. This has a bigger benefit to us in a post-COVID world than it did before.

The firm’s celebrated robotic-run warehouses are a major strength here, he argued: 

Robotics also benefits in a COVID world in terms of having less people in the workplace, less people through the doors for changing rooms, the restaurant facilities, and also to help our clients customers to understand that their food hasn't even been touched by human…Our target for this year end is for a robotic pick cell to have equal or greater efficiency than the human picking. So, we think we can match the human pick speed in a robotic cell. That robotic cell may actually have two robots in it, but will be the same footprint and the same pick station that used to be operated by one human.

My take

The welfare of the people in the ‘back room’ at online retail operations is a subject that pre-dates COVID-19, but the virus has added a new element to the debate. While consumers in lockdown have undoubtedly appreciated and benefitted from the capabilities of online shopping, it’s important to remember that the customer-touching interface of e-commerce is only part of the picture.Those retailers who’ve lived up to their responsibilities are the ones who deserve our business in a post-pandemic future.