Is South Africa ready for the Amazon effect?
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The announcement that Amazon will set up South African headquarters in an R4 billion Cape Town development was met with excitement and concern. It was exciting to those who care more about the economy and jobs but concern by environmentalists and those who care about heritage.
There’s one concern that has not been raised yet and it relates to what is known as the Amazon Effect. It is known as the powerful disruption that e-commerce has made on the retail market. The term came about as a result of Amazon's dominant role in the e-commerce marketplace and leading the disruptive impact of the industry. Based on recent developments it seems the Amazon Effect is coming for South Africa.
Amazon has been around in South Africa since 2004 when its first development centre was opened in Cape Town. Early work focused on refining Amazon’s ground-breaking Elastic Compute Cloud (EC2) service which functions as a virtual private server.
It is unlikely that this imminent expansion will only be about the AWS business. The plan to take so much space, 70 000m², can only mean something more is coming from Amazon.
Industry insiders speculate that Amazon will launch an online retail business locally to take on local e-commerce players and retail. If this proves true, local players have more reasons to be concerned.
The history of Amazon tells us that as the e-commerce giant grows, it leaves casualties along the way. In 2016 the Institute for Local Self-Reliance (ILSR) in the US published a report which highlighted how Amazon was monopolising the US Economy, the report focused on how Amazon was using its market power to eliminate competition and take control of one industry after another, leaving an economy that is less diverse and innovative, and which affords fewer opportunities for businesses to start and grow.
The report also raised concerns about Amazon and its labour practices. The report found that Amazon’s labour model and work inside its distribution facilities resembled labour’s distant past more than a promising future, with many workers performing gruelling and underpaid jobs, getting trapped in precarious temporary positions, or doing on-demand assignments that are paid by the piece.
Although Amazon has not yet announced plans to launch an online retail business in South Africa, there are signs that this is possible. Given such possibility, it is now time for South African retailers, legislators, and workers to understand what the world would look like under Amazon.
The American e-commerce giant has shown what e-commerce can do to traditional retail and everyone followed. Amazon is about to show us what automation would look like on the factory floor. It is this part of Amazon that should be of concern to many who care about jobs.
Amazon is increasingly defining what entry-level labour now looks like in America, not least because the company’s dominance across so many sectors of the economy is leading rivals to adopt its ways. This new form of work has replaced countless brick-and-mortar retail jobs, but it is more physically taxing than those jobs; it is also less remunerative and purposeful than much of the assembly-line work it more closely resembles.
The jobs are highly repetitive and relentless and have become only more so as the warehouses have become automated, with more robots for workers to keep pace with and more surveillance tools to track their performance.
There’s no better company to watch than Amazon when it comes to the implementation of 4th Industrial Revolution technologies.
Amazon is poised to bring its automated checkout technology to full-size supermarkets, a significant milestone in the race to revolutionise how people buy their groceries. Shoppers enter those locations by swiping a smartphone at the entry gate. Inside, they're tracked by cameras, software algorithms, and shelf sensors – then charged for what they take when exiting through the designated gates.
Is South African retail ready for such a level of automation in the retail space? Now that Amazon has big plans in the country, anything should be expected and the level of excitement should be dashed with concern for local businesses and employment conditions.
The second phase of the Amazon Effect will take us to places we’ve never imagined. There will be good parts to what Amazon will bring however it will also bring undesirable elements that will change the nature of jobs and businesses.