The Cost of Free Shipping

Amazon in the Global Economy

Jake Alimahomed-Wilson, Ellen Reese, Jake Alimahomed-Wilson, Ellen Reese

• Publisher: Pluto Press
• Year: 2020
• ISBN:
  9781786807526
• Topic: Negocios y empresa
• Subtopic: Gestión de la cadena de suministros

**Winner of the UALE Book Award 2021**

Amazon is the most powerful corporation on the planet and its CEO, Jeff Bezos, has become the richest person in history, and one of the few people to profit from a global pandemic. Its dominance has reshaped the global economy itself: we live in the age of 'Amazon Capitalism'. 'One-click' instant consumerism and its immense variety of products has made Amazon a worldwide household name, with over 60% of US households subscribing to Amazon Prime. In turn, these subscribers are surveilled by the corporation. Amazon is also one of the world's largest logistics companies, resulting in weakened unions and lowered labor standards. The company has also become the largest provider of cloud-computing services and home surveillance systems, not to mention the ubiquitous Alexa. With cutting-edge analyses, this book looks at the many dark facets of the corporation, including automation, surveillance, tech work, workers' struggles, algorithmic challenges, the disruption of local democracy and much more. The Cost of Free Shipping shows how Amazon represents a fundamental shift in global capitalism that we should name, interrogate and be primed to resist.

PART I

Amazon’s Rise in Global Power

1

Amazon: Context, Structure and Vulnerability

Kim Moody

Amazon the corporate chameleon claims to be the world’s largest online retailer. According to CEO and founder Jeff Bezos, it is actually a tech company.¹ While it is both of these, New York University business school analyst Scott Galloway notes that “Amazon is building the most robust logistics infrastructure in history.”² Two business consultants in their analysis of Amazon concluded that as it entered its third decade, “Amazon is already a major global logistics player.”³ The U.S. trucking industry journal Transport Topics more recently asked “Should Amazon.com be considered one of the largest logistics companies in North America? The answer, according to most industry observers,” the journal replied, “is yes.”⁴

Including its technological capabilities, it is this logistics infrastructure that has propelled Amazon into its leading position in a highly competitive industry. And it is this efficiency and the costs of moving goods at high speeds in the maelstrom of global competition that has brought enormous pressures on the workers in its expanding network of sortation and fulfillment centers, Prime Now hubs, delivery stations, and data centers, as well as those working in the many forms of transportation that connect these and the ultimate customers. This chapter focuses on the expanding configuration of Amazon’s logistics infrastructure, its place in the emerging global network of transportation and forces of competition in a world of shifting economic power, their impact on Amazon’s workforce, and the vulnerability of Amazon to worker resistance.

Contrary to much mythology surrounding Amazon’s success, Jeff Bezos and his crew of techies and quants simply did what robber barons have always done: raise, spend, and sometimes lose other people’s money, dodge taxes, swindle suppliers, and avoid unions. Amazon had the good fortune to be born in the midst of the great dot.com boom of the 1990s when venture capital was cheap and investors were searching for innovative startups. In the heat of the boom, Amazon pulled in $2.1 billion in other people’s money by 2001, far more than the $50 million typically raised by other tech startups in that period, according to Galloway.⁵ For years, it avoided paying U.S. sales taxes because it had no brick-and-mortar stores and as a low-margin earner it paid only $2.3 billion in U.S. corporate income taxes from 2002 to 2017, comparted to Walmart’s $103 billion.⁶

Amazon put its borrowings and earnings into the heartbeat of logistics infrastructure, the modern warehouse, on the one hand, and the big data operation that would become Amazon Web Services (AWS), on the other. Amazon’s annual investment in property and equipment rose from $979 million in 2010 to $13.4 billion in 2018—more than Walmart invested in 2018 and, unlike Walmart, almost all of it in logistics facilities.⁷ And not just any property and equipment: Amazon borrowed innovations from Walmart and others who led the “logistics revolution” and created the modern warehouse with its emphasis on moving goods rather than storing them. In addition, they applied the manufacturing practices of lean production and just-in-time delivery to warehouse configuration and its internal supply chain.⁸ In the process Amazon became a capital-intensive mover of goods and a participant in the “logistics revolution,” disguised as a retailer.

THE LOGISTICS REVOLUTION, COMPETITION, AND TIME

As global trade took off in the 1980s, the infrastructure needed to move the growing volume of goods expanded and the logistics revolution transformed the way goods were moved.⁹ According to World Bank figures, the number of twenty-foot equivalent units (TEUs) (measured as shipping containers) entering the world’s ports grew from 224.8 million in 2000 to 752.7 million in 2017, while freight carried by airlines around the world increased from 118.3 million ton-kilometers to 213.6 million over that period. The World Bank figures for rail movement are incomplete, but these rose from 2.3 million ton-kilometers in 2000 to 5.8 million in 2007.¹⁰ And this was before the shift of the center of world economic activity eastward and the escalating density of rail traffic in Asia and China’s 10,000-mile-long Silk Road freight railway from China to Europe, all part of China’s “One Belt, One Road” development initiative.¹¹

In the U.S., the dollar value of all freight doubled from 1998 to 2017, while the newest form of rapid movement, intermodal truck/rail freight rose by 6½ times, from a value of $70 billion in 2002 to $460 billion in 2017.¹² The number of warehouses grew by nearly 2¾ times, from 1998 to mid-2019 to over 18,000, while their size increased dramatically and the warehouse workforce nearly doubled to just over a million production and nonsupervisory workers.¹³ As logistics guru Yossi Sheffi put it, “Physical infrastructure dominates logistics investment.”¹⁴ This infrastructure has become, as LeCavalier put it, “the connective tissues and the circulatory systems of modernity.”¹⁵ Or at least, of modern capitalism.

While there are countless Third Party Logistics (3PL) firms globally and in the U.S. that help move things around this circulatory system, there are a few that dominate the industry in the U.S. and to some extent internationally, such as UPS, FedEx, XPO, DHL, Ryder, J.B. Hunt, and Schneider. UPS operates 1,000 package handling facilities, while FedEx has 1,200.¹⁶ FedEx and UPS also command large fleets of aircraft and huge airport facilities. Most of these were formerly trucking or package delivery firms that transformed themselves into massive full-service logistics operations in the early twenty-first century. All of these appear in both Transport Topics’ “Top 100 For-Hire-Carriers” ranking of trucking firms and its “Top 50 Logistics” companies for the U.S.¹⁷

Sheffi also reminds us that “an information supply chain parallels each physical supply chain.”¹⁸ In addition to the expansion of transportation infrastructure, new technology in the form of bar codes, Radio Frequency Identification (RFID), Electronic Data Interchange (EDI), GPS, “data Warehouses,” “big data,” and the “cloud” enabled new levels of prediction, tracking, coordination, movement, and work intensification.¹⁹ Information technology links all aspects of logistics from the movement of goods over roads, rail, air, and sea, to the various distribution and fulfillment facilities and their internal functioning. Huge data warehouses or centers are a key part of this physical supply chain infrastructure and central to the effort to speed up and smooth out the movement of goods and money. By 2019, there were about 2,500 data centers in the U.S.—a part of logistical infrastructure that barely existed twenty years earlier.²⁰

In retail, it was first and foremost Walmart that pulled together all these strands in contemporary logistics, including the massing of data about the behavior of consumers and the movement of goods from producer to distribution center to big box store. It was Walmart that pioneered the cross-dock warehouse in which goods move in one door and out another without being racked or stored.²¹ Yet, a difference in the centrality of logistics between Walmart and Amazon can be seen in the fact that as of 2019 Walmart had only 114 distribution centers in the U.S., while Amazon had some 477.²² Thus, it would be Amazon that applied the lessons of logistics infrastructure and technology to the movement of other people’s goods to its own customers, without the costly stores.

The growth of global logistics has intensified both competition and the speed at which things are produced and moved to market. Beginning with the introduction of lean production and just-in-time (JIT) inventory into the West f...