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Coronavirus crisis could prompt Amazon, other retailers to invest in automation

Amazon.com Inc. and other e-commerce retailers are likely to invest more in automation as a result of the coronavirus pandemic, a move experts say would allow the companies to further reduce reliance on human labor and better handle shocks to their supply chains in the coming years.

Retailers including Amazon, Walmart Inc. and The Kroger Co. have already invested in technology tools ahead of the virus outbreak to increase efficiencies within their physical stores and warehouses, such as systems for picking customer orders, tracking inventory and automating grocery delivery.

But experts believe that the outbreak, which caused massive supply chain disruptions and led to worker backlash over a lack of safety supplies, could be a catalyst for millions of additional dollars in automation and robotics capabilities that automate tedious tasks otherwise performed by low-wage workers.

Increased adoption of robotics will give retailers more consistency and control in their supply chains, which have experienced bottlenecks due to soaring demand for online goods. On the flip side, those investments, over time, are likely to threaten millions of U.S. jobs, including positions susceptible to automation in transportation and food preparation.

"There's no question that it will be an accelerant," said Brandon Fletcher, an analyst at Sanford C. Bernstein & Co., in an interview. "Robotics on an economic basis alone would not have caused the shift. It's because there's a fear that [their] workers will walk off or my customers won't buy, and that's a big enough issue to accelerate robotics."

Amazon and Kroger declined to comment. Walmart did not immediately respond to inquiries.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

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The coronavirus outbreak may lead top retailers like Amazon and Walmart to accelerate automation to lessen their dependence on human labor. Pictured here is an orange Kiva robot that roams around an Amazon warehouse.

Source: Amazon

Robot ready

The larger retailers are well positioned to further capitalize on automation, with many of them actively looking to expand existing technologies or considering acquisitions that would bolster robotics in warehouses, experts say.

"The number of units installed is absolutely going to increase in the coming months and years," said Eugene Demaitre, senior editor at The Robot Report, an online news outlet that tracks the business of robotics, in an interview. "Every link in the supply chain, from the factory to the farm on the one end all the way to your doorstep, is an opportunity for automation."

Amazon is one of the most prominent disruptors in the retail automation space, starting with its 2012 acquisition of material handling technology company Kiva Systems for $678 million. Amazon has since deployed thousands of orange Kiva robots into warehouses, where they scoot small bins and large pallets of products to staffers. In 2019, the company bought warehouse robotics startup Canvas Technology Inc.

Meanwhile, Walmart is expanding deployment of its Bossa Nova inventory robots from 350 Walmart stores to 1,000 by the end of 2020, according to The Robot Report. And in 2019, supermarket chain Kroger launched its autonomous grocery delivery service in Texas through a partnership with robotics company Nuro. Koninklijke Ahold Delhaize NV said in 2019 that a subsidiary of its U.S. unit partnered with Jabil Inc.'s Badger Technologies to deploy nearly 500 robots across its U.S.-based Stop & Shop and Giant Martin's locations.

Those companies all "have the economies of scale to say 'OK, we've tested 100 robots in 100 stores, now let's roll them out to 1,000,'" Demaitre said.

And the technology is largely ready for use by companies like Badger Technologies, IAM Robotics, Pensa Systems and Brain Corp., he said. "Pretty much every mobile robot company out there has moved from testing in various retailers to deployment," he said.

Companies may deploy technology in a variety of ways to help put shoppers at ease, including contactless payment systems that do not require human interaction, he said.

"Imagine if you had a robot to bag your groceries instead of having to worry about handling things or someone else handling things," Demaitre said.

They may also automate worker tasks including sanitization, moving inventory within a warehouse, and transporting items on and off trucks, experts said.

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Experts say companies like Amazon and Walmart may invest more in automated systems that can protect workers and increase shopper satisfaction. Pictured here is a floor-scrubbing robot at a Walmart store.

Source: Walmart

Sucharita Kodali, vice president and principal analyst with Forrester Research, said the coronavirus outbreak has certainly elevated the business case for more automation. But Kodali noted that adopting new technology depends on whether a specific robotics system fits squarely with what a company like Amazon needs. "It's easier said than done," she said. "You're not going to get take-off technology into a warehouse tomorrow. It's going to take time."

Labor woes

Retailers are motivated to automate low-wage work due to increased difficulty finding quality hourly employees during an outbreak that has killed more than 116,000 people worldwide, experts say.

Amazon is adding 100,000 new full and part-time positions across the U.S. at its fulfillment centers and delivery network to meet growing demand. Walmart and Kroger also are collectively hiring thousands of employees.

But the viciousness of this pandemic and its associated health risks will make it extremely difficult for the companies to attract workers to low-paid positions despite efforts to increase hourly wages and boost benefits, said David Marcotte, senior vice president of cross-border retail for Kantar Consulting.

"I keep hearing stories of people walking in stores with only one cashier," Marcotte said in an interview. "It's very hard to cope with people when the fear sets in."

Retailers like Amazon also face increasing pushback from employees upset over a lack of protective gear, giving the companies another reason to automate their tasks. In early March, Amazon, along with its more than 500-store grocery arm, Whole Foods Market Inc., faced worker backlash as some staffers walked off the job. The United Food and Commercial Workers International Union supported the protests, saying Amazon and Whole Foods workers should have increased protections.

"Management has had the upper hand for at least 30 years, and all of a sudden they don't," Marcotte said. "Today, you have a mindset of organized labor."

Labor pools are also constrained by the fact that many would-be workers such as semiretired workers and stay-at-home parents are "sitting out the next few months" to avoid the risk of getting ill, said Julia Pollak, labor economist with ZipRecruiter, in an interview.

"Parents are calling their children and saying 'Please stop your delivery driver job, we don't want you running into a pizza shop with a million other delivery drivers every day. We'll send you money,'" she said.

Pollak said retailers may be eager to snap up employees who were laid off from retail jobs. In March alone, the retail sector shed 46,000 jobs, according to the U.S. Bureau of Labor Statistics. But those workers are likely to hold off on new positions given that they are going to be receiving "very generous" government unemployment insurance benefits, she said.

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Automation exposure

The increasing shift to automation could have an impact on about 36 million U.S. jobs by 2030, according to the Brookings Institution, a nonprofit public policy organization based in Washington D.C.

Men, younger workers and underrepresented communities that work in automatable occupations such as production, transportation and construction-installation are most at risk of job loss, said Mark Muro, senior fellow and policy director at the Brookings' Metropolitan Policy Program. Hispanic, American Indian and black workers also face automation potentials of 47%, 45% and 44%, respectively, above their white and Asian counterparts.

Men are somewhat more exposed because of their involvement in manufacturing and trucking, Muro said. But the growing number of fulfillment jobs may soften the blow, given that Amazon and United Parcel Service Inc. can hardly find enough drivers right now, he said.

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Younger workers aged 16 to 24 who are more likely to work in food preparation and serving positions also are at risk, Muro said. One question is whether food service roles can transition to positions within food delivery companies like Grubhub Inc., whose delivery services are in demand, he said.

But, Muro said, "those would be gig jobs, not necessarily good jobs."

In the coming year, companies whose automation programs are ready to roll out may incrementally decrease staff through layoffs, attrition and not refilling vacated positions, Muro said. Many workers whose tasks have been automated may also transition to better-paying positions within a warehouse or distribution center, he said.

"You will not see wholesale lights-out firings," Muro said. "What you will see is, over a year or two, the steady replacement of some workers with machines and actual hiring of higher-skilled people to either operate the machines, service them or work in a differently configured business process."