Retail giant Walmart made a stunning, shocking and somewhat concerning announcement this week when it said that in just a few years, 65% of its stores in the United States would be serviced by different automation services.
It added that more than half of the volume at its fulfillment center would move through facilities that are automated. The company further added that these moves would result in unit cost averages improving by about 20%.
John David Rainey, the CFO of Walmart, said at a recent investor meeting that automation would improve “how merchandise arrives at stores.” He also commented on what the impact on the company’s top line would be when he said:
“Our targeted 4% compounded growth implies that over the next five years, we’ll add more than $130 billion of sales on top of our $600 billion base today.”
Walmart is continuing to work on trying to compete with Amazon. It apparently believes that one of the biggest ways it can do so is through fast delivery, and fulfillment centers that are automated could ultimately set a completely new precedent.
John Furner, Walmart’s U.S. CEO and president, said that these new automated fulfillment centers “can double the number of orders we are able to fulfill in a day, which means packages arrive at customers’ doorstep faster than ever before.”
The troubling aspect of this announcement from an employment standpoint is that it’s very possible that a lot of manual labor will be removed from Walmart’s chain. Company officials said that their total employees wouldn’t drop as a result of automation.
In fact, they are trying to spin the narrative that automation – while resulting in certain human jobs being eliminated – will actually result in more total jobs at the company, all of which will likely be higher-paying than the manual jobs that automated tasks will replace.
As Furner explained:
“Over time, we’ll have the same number of associates, possibly even more, but we’ll have a larger business and they’ll be new roles that’ll emerge that are more technical … and they’ll pay more.”
This, of course, comes at a time when Walmart just completed a layoff round at five different e-commerce warehouses in the U.S., which affected in excess of 2,000 jobs.
Many investors are believing what Walmart is pitching, too. For instance, Arun Sundaram, an analyst for CFRA, said recently:
“A lot of these lower-level jobs will be cut, but they’ll redirect these employees to other jobs that require less manual labor. They’re expecting, also, to increase their employee retention, now that less strenuous jobs, less manual labor and more of those higher-paying jobs will be available.”
Furner tried to support those claims by saying that the average hourly wage at the company has increased by about 30% in the last five years. Just a few months ago, the company also announced that it would be increasing its average hourly rate to at least $17.50, with the range for jobs between $14 and $19 an hour.
