Amazon.com Inc. (NASDAQ: AMZN) has had one of the greatest runs in the history of American business. Starting in a garage in 1994, it has become the second-largest U.S. company and may overtake Walmart for first place next year. This timing perfectly matched the rise of the internet and the move away from shopping patterns that drove physical store traffic for decades. Amazon has hit one of the largest challenges in its history recently. Some of its workers want to join unions. If this move is successful, Amazon’s expenses will rise sharply.
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The most recent union challenge comes in Albany, New York. Workers in the Amazon warehouse want to join the independent Amazon Labor Union (ALU). A vote will occur within days. An earlier, similar move in Staten Island, was a win for labor. As Amazon battles these moves, it faces pressure from OSHA, according to Yahoo! News.
Amazon is no longer one business. What started as an e-commerce company is currently an online store in addition to being the world’s largest cloud operator. While the cloud division, Amazon Web Services (AWS), has become a raging success, the e-commerce part of Amazon has shrinking margins. Shipping costs, labor costs and a recession will make this worse.
In the most recently reported quarter, Amazon’s revenue reached $121 billion, up from $113 billion in the same quarter the year before. Operating income fell to $3.3 billion from $7.7 billion. Amazon’s North American e-commerce business was in trouble. While revenue rose to $74.4 billion from $67.6 billion, the division lost $627 million, compared to an operating profit of $3.1 billion.
Earnings for the entire company were not dismal because of AWS. Its revenue went from $14.8 billion in the quarter a year ago to $19.7 billion. Operating profit rose from $4.2 billion to $5.7 billion. AWS does not face any labor challenges.
Unionization of the Amazon warehouse workforce will permanently add to expenses. What was once a strong business financially will need to carry a new set of costs.
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