Online Retailers’ New Warehouses Heat Up Local Job Markets
Fulfillment centers for online retailers are offering flexible work schedules, gift cards, bonuses and raises to attract workers
Retailers and logistics companies have been opening warehouses at a record pace to ensure online orders reach customers as quickly as possible. Now they’re struggling to find workers to staff them.
Amazon.com Inc., AMZN -0.38% Wal-Mart Stores Inc. WMT 2.06% and other e-commerce giants rely on armies of “pickers” to grab items off warehouse shelves and prep them for shipment. For years they’ve drawn from a seemingly limitless pool of people willing to take these jobs, which can be grueling but require little training or education.
But with the unemployment rate close to a 10-year low, competition for warehouse workers is fueling the biggest wage gains inside warehouses in at least a decade.
Starting pay for warehouse workers rose 6% over the past year to $12.15 an hour in February, according to an analysis by ProLogistix, a logistics staffing firm. Hourly earnings rose 2.8% across all professions over the same period, according to the Labor Department’s Bureau of Labor Statistics.
The warehouse and storage sector expanded dramatically as more people shop online, and accounted for 945,200 jobs in March, up 5.3% over the year-earlier period, according to seasonally adjusted Bureau of Labor Statistics data released Friday.
Warehouse workers typically earn a few dollars an hour above minimum wage, though minimum-wage laws in places like California and Massachusetts could narrow the gap.
Luis Ramirez works as a 'picker' at a Redlands, Calif., distribution center, collecting fashion items from stock shelves to fill online orders.
Emory Montgomery works at the warehouse, operated by Radial for fashion retailer Zara, organizing outgoing packages. Radial recently raised pay at the facility by 5% to 7%.
Judith Lopez has worked at the packing station at the Redlands facility for two years and lives in nearby San Bernardino.
Cameron Mitchell has worked for close to two years at the warehouse, which is surrounded by other distribution centers.
Booming sales mean e-commerce operations have to ship more items faster, and pay increases are imposing new costs. E-commerce fulfillment centers require two to three times as many workers as traditional warehouses, says CBRE Group Inc., a real-estate brokerage. It estimates a $1-an-hour wage increase can raise labor costs by more than $2 million a year at “big box” warehouses employing as many as 1,000 workers.
Many new facilities Amazon.com Inc. is opening around the country have 2,000 or more full-time employees, an Amazon spokeswoman said. The e-commerce giant, which has more than 90,000 full-time workers across its fulfillment network, said Thursday it plans to create 25,000 additional part-time warehouse jobs over the next year.
Rising labor costs are speeding up the pace of automation and influencing where new warehouses are built. And as poaching becomes a bigger threat, employers are trying to make picker jobs more attractive, with perks like employee barbecues and holiday breakfasts, as well as more-flexible shifts.
It doesn’t take much to lure workers away. “A guy who makes $10 an hour, you offer $10.25, he’s going to leave,” said Tom Landry, president of Allegiance Staffing, which supplies logistics and manufacturing workers. “That’s another tank of gas.”
Employees prep and ship internet orders at packing stations in the Redlands distribution center. PHOTO: ANDREW CULLEN FOR THE WALL STREET JOURNAL
Some warehouse operators are adding part-time positions or compressed shifts that pack 36 hours of work into three days, in hopes of luring students, working parents or retirees. Some firms are tapping local organizations and community colleges. Incentives deployed each fall for the holiday rush, like performance pay, are becoming more common year-round.
“It’s almost like peak [season] is never ending,” said Meghan Henson, chief human resources officer at XPO Logistics Inc., which operates warehouses for large retailers like IKEA. “If a warehouse is going up down the block, we want to find out what they’re paying.”
Amazon.com and online furniture retailer Wayfair Inc. have opened warehouses near Cincinnati/Northern Kentucky International Airport. The delivery companies FedExCorp., United Parcel Service Inc. and Deutsche Post AG’s DHL also have operations in the area. Average pay in 2015 for freight and stock employees, such as warehouse pickers, in the Cincinnati metro area shot up to more than $14 an hour, according to the Bureau of Labor Statistics.
Finding enough workers “is certainly a concern,” said Dan Tobergte, chief executive of Northern Kentucky Tri-ED, a regional economic development agency. We’ve got pretty low unemployment in the area,” he said, and the population isn’t “growing as fast as the jobs are.”
Competition for labor is intense in areas such as Southern California’s Inland Empire and Central Pennsylvania, within a day’s reach of millions of consumers. Demand is heating up in Midwestern cities like Indianapolis and St. Louis, according to commercial real-estate services firm JLL.
Radial, which handles e-commerce fulfillment for retailers like Kate Spade & Co. andDSW Inc., increased wages at eight U.S. locations in December, including raises of between 5% and 7% at a facility in Redlands, Calif.
“Last year was really the tipping point for us,” said Robyn Jordan, senior director of human resources for Radial’s global operations.
Luis Ramirez, 26 years old, joined Radial in 2014, after hearing it was paying $10 an hour at a new distribution center for Zara, a retail unit of Inditex SA . That was 50 cents an hour more than he earned at a warehouse jobhe got through a staffing agency.
Mr. Ramirez earned a $200 attendance bonus during therecent holiday seasonand said Zara gives out $100 gift cards at the end of the year. Employees also canget paid more if they exceed targets during busy times, when apparel goes on sale. “For picking, the rate is 65 [clothing items] an hour,” Mr. Ramirez said. Workers who exceed 70items an hour “get a dollar extra for every hour you hit that rate.” He said he plans to stayat Radial for now.
Nancy Loera packs items to be shipped from the Redlands warehouse. Radial recently raised pay at the warehouse by 5% to 7%. PHOTO: ANDREW CULLEN FOR THE WALL STREET JOURNAL
Raising pay can reduce employee turnover and save companies money on training. Experienced workers tend to be more productive, said David Caines, chief operating officer at logistics provider Kenco.
Some companies are investing in automated systems so their facilities can handle more orders without hiring additional staff. Software can direct workers to the right shelf faster and reduce errors.
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A new Kohl’s Corp. e-commerce fulfillment center in Indiana will be “three times as productive as our existing fulfillment centers, given the level of automation,” the company said in February.
“We used to do maybe one highly automated distribution center out of 10,” said Steve Osburn, a managing director at consulting firm Kurt Salmon, an Accenture subsidiary. “Now it’s 80% of the DCs that we’re dealing with.”