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Listening to Walmart Inc. executives discuss the future of the company reminds us of how difficult the recent past has been. Like many retailers, Walmart has been forced to ramp up its e-commerce business to meet a pandemic-driven surge in online shopping. It initially struggled to fill shelves as shoppers cleared the goods, then rushed to shed goods as knots in the supply chain were untied.
Now it says it has big plans to restore operating margins and increase profitability. For two days this week, Walmart executives outlined their strategy to grow sales by 4% and grow operating income by 4% or more over the next three to five years. The company wants to make better use of its online-offline model; diversify income streams; and scale high-return investments. But the most far-reaching approach has been automation.
Walmart, the largest employer in the US, plans to dramatically transform retail work by using robots to take on more and more complex tasks. As an industry pioneer, what Walmart does impacts everyone else. On the one hand, its automation investments provide a blueprint that competitors can follow to drive down costs. On the other hand, it could be a game changer on how to responsibly manage this new era of job insecurity.
In Walmart’s vision of the company’s future, people are an important but expensive asset compared to newer and increasingly cheaper automation technologies. By the end of 2026, approximately 65% of stores will be served automatically and approximately 55% of fulfillment center volume will be routed through automated facilities. The company estimates that this would save about 20% on the average cost of moving a product along its factory lines.
Walmart unveiled its supply chain innovation to financial analysts Tuesday at its regional distribution center in Brooksville, Fla. There, automated forklifts unload trucks and large robots sort boxes and move them through the 1.4 million square foot distribution center. Such automation helps the company respond more quickly to consumer demand and improve its delivery service in a consistent and predictable manner. It also reduces the amount of physical labor while increasing pay, said John Furner, Walmart US chief executive officer. And it helps reduce costs, which means a better return, he added.
Chief Executive Office Doug McMillon has previously addressed this issue. In December, he told investors that automated warehouses save a lot of the time workers spend sorting goods in backrooms of stores. Along with investments in advertising and fulfillment services, “then you have a more attractive income statement,” he said.
So less monotonous work and more wages, but lower overall costs – the unspoken compromise is often fewer workers.
The company is already shedding jobs in its warehouses as it pushes automation. It plans to cut 2,000 e-commerce fulfillment jobs in the US and close underperforming stores, leading to more layoffs.
It’s hard to escape the reality that with more automation will come a more streamlined workforce – a process that will repeat itself over and over again with ever greater technological sophistication. Technology can improve labor productivity and free people from some groundbreaking tasks like moving heavy boxes through a fulfillment center. It also creates opportunities for workers to improve their skills and become technicians instead of manual workers. However, with each innovation, new tasks are added to the robot list.
This has serious implications for those without a college education who have traditionally relied on retail or warehouse work to break into the workforce. Automation requires fewer skilled workers who may not have the advanced technical skills to operate robots. That could further widen the gap between rich and poor, as workers without a college degree find fewer job prospects.
Of course, Walmart isn’t alone in its sprint toward automation. Amazon.com Inc. has a long history of using robots in its warehouses, which is responsible for its success in the supply chain. However, more traditional brick-and-mortar stores rely on automation. Nordstrom Inc. leverages automation throughout its supply chain, which has enabled it to increase the productivity and speed of its distribution center by 20%. Panera Bread Co. and Popeye’s Louisiana Kitchen Inc. are both testing automated ordering in some drive-throughs, where robots are replacing the workers who used to take customer orders.
Walmart’s big automation plans simply reflect a broader transition across the industry, with workers working side-by-side with robots. But workers who are not prepared for that future will lose. What is Walmart’s responsibility here? The company is already investing heavily in preparing workers for a more technological future. In an ideal world, Walmart and its competitors would do more. They could support (or work with) programs outside of universities and colleges to train workers in the technologies that are becoming staples in the industry. For example, Google created a fund to invest in nonprofit programs that train non-college workers in information technology, data analysis, and project management so they can move on to high-paying jobs. If Walmart is going to be a leader in transforming the retail workplace, it also has some responsibility to ensure workers on the other end can continue to thrive. Not just robots.
More from the Bloomberg Opinion:
• Half a million job cuts could be just the beginning: Lionel Laurent
• ChatGPT-4 fails to replicate the humanity of one writer: Adrian Wooldridge
• What Walmart doesn’t know should worry us all: Leticia Miranda
This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.
Leticia Miranda is a columnist for Bloomberg Opinion covering consumer goods and retail. She was previously a business reporter at NBC News and a retail reporter at BuzzFeed News.
For more stories like this, visit bloomberg.com/opinion