Posted on

The Luxury E-Commerce Wars Heat Up

In 2015, the chairman and controlling shareholder of the luxury goods group Richemont, Johann Rupert, took to the stage at an industry conference in Monte Carlo and issued a rallying cry to some of his biggest rivals.“I invited the other big groups to create a singular, dominant neutral platform for the luxury goods industry in which we were shareholders,” Mr. Rupert, a blustery South African, recalled this month. “I was talking to Mr. Arnault of LVMH and Mr. Pinault of Kering,” he said, referring to the heads of two major luxury conglomerates, Bernard Arnault and François-Henri Pinault. “I told …

Read More

Posted on

Pushed by Pandemic, Amazon Goes on a Hiring Spree Without Equal

SEATTLE — Amazon has embarked on an extraordinary hiring binge this year, vacuuming up an average of 1,400 new workers a day and solidifying its power as online shopping becomes more entrenched in the coronavirus pandemic.The hiring has taken place at Amazon’s headquarters in Seattle, at its hundreds of warehouses in rural communities and suburbs, and in countries such as India and Italy. Amazon added 427,300 employees between January and October, pushing its work force to more than 1.2 million people globally, up more than 50 percent from a year ago. Its number of workers now approaches the entire population of Dallas.The …

Read More

Posted on

Amazon Faces E.U. Antitrust Charges

LONDON — European Union regulators brought antitrust charges against Amazon on Tuesday, saying the online retail giant broke competition laws by unfairly using its size and access to data to harm smaller merchants who rely on the company to reach customers.

The European Commission, the executive branch of the 27-nation bloc, said Amazon had abused its dual role as both a retail store used by scores of vendors, and a merchant that sells its own competing goods on the platform. The authorities accused Amazon of harvesting nonpublic data from sellers who use its marketplace to spot popular products, then copy and sell them, often at a lower price.

“We must ensure that dual role platforms with market power, such as Amazon, do not distort competition,” Margrethe Vestager, the commission’s vice president for digital issues, said in a statement. “Data on the activity of third party sellers should not be used to the benefit of Amazon when it act as a competitor to these sellers.”

The case, which has been expected for months, is the latest front in a trans-Atlantic regulatory push against Amazon, Apple, Facebook and Google as the authorities in the United States and Europe take a more skeptical view of their business practices and dominance of the digital economy. Last month, the Justice Department brought antitrust charges against Google, and Apple and Facebook are also facing investigations in both Washington and Brussels.

Many in Europe will be watching to see how the Amazon announcement is received by the incoming administration of President-elect Joseph R. Biden Jr., who is expected to pursue policies that limit the industry’s power. The Trump administration has criticized Ms. Vestager for aiming at American companies like Apple, even as it initiated its own investigations of the industry.

In the Amazon case, the announcement on Tuesday is still preliminary and is just one part of the regulatory process. Amazon now has a chance to respond to the charges. It can take many months, or even years, before a fine and other penalties are announced. The commission also could reach a settlement with Amazon, or the case could be dropped.

The European Commission said it has also started a parallel investigation of Amazon policies around its “buy box,” an important piece of real estate on Amazon’s website that makes it easy for consumers to quickly click to make a purchase.

Image
Credit…Olivier Hoslet/Agence France-Presse, via Pool/Afp Via Getty Images

The commission is studying whether Amazon gives preferential treatment for the buy box to its own products and those of other sellers that pay to use Amazon’s logistics services.

Amazon denied any wrongdoing and said it supports thousands of businesses in Europe.

In Brussels, Amazon has been gearing up for a legal fight. It has hired a team of lawyers and economists, including several who in the past were encouraging tougher enforcement against Google and Microsoft.

“We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts,” the company said in a statement. “No company cares more about small businesses or has done more to support them over the past two decades than Amazon.”

The case reinforces the European Union’s role as a leading tech-industry watchdog, even as past investigations of companies like Google have done little to diminish their power. Authorities in Brussels have argued that the biggest tech platforms unfairly use their power to box out competitors, though means like bundling products, charging high fees in app stores and hoarding data.

Ms. Vestager has raised alarms about the “gatekeeper” role of companies like Amazon, Apple, Facebook and Google. The companies have reached such a size, Ms. Vestager has argued, that they are essentially micro-economies, setting rules and policies with little transparency that determine the fate of millions of other businesses that have no choice but to follow along.

About 2.3 million third-party merchants around the world use Amazon to reach customers, including about 37 percent who rely on the company as their sole source of income, according to a United States congressional report published last month. In the European Union, Amazon has information on about 800,000 active sellers using its platform, covering more than 1 billion products, according to the European Commission.

Ms. Vestager has warned the biggest companies will only grow stronger without tougher antitrust enforcement and new regulations, blocking new companies and innovations from emerging.

Next month, the European Commission is expected to unveil a new package of laws that would represent one of the world’s most sweeping set of regulations of the tech industry. It could include rules prohibiting the self-preferencing of products and requiring the biggest companies to share data with smaller rivals.

In the Amazon case, European authorities spent two years investigating the company’s dual role as both a retail store and seller of its own goods.

Amazon argues that it only makes up a small sliver of the global retail market, but for many smaller merchants the company is the main gateway to online sales. Worries about Amazon’s power have only grown during the pandemic, as internet sales become increasingly vital to businesses grappling with lockdowns and lost foot traffic. Since 2015, e-commerce sales in the European Union nearly doubled to about 720 billon euros, or about $850 billion.

Sellers have long raised concerns that if Amazon sees a particular product doing well on its website, the company would create its own version, sell it at a lower price and then give it better placement on the Amazon website.

The European Commission said those concerns were supported by a review of data on more than 80 million transactions and 100 million products. Ms. Vestager said it showed how Amazon used the data from outside sellers to determine what computer accessories, kitchen tools or other products to introduce, as well as where to set prices and how to manage the inventory.

The real-time information Amazon collects includes order totals, number of visitors to certain products and a merchant’s revenue.

“This is a case about big data,” said Ms. Vestager. She said the investigation centers on Amazon’s behavior in France and Germany, where she said Amazon has a “dominant” position in the market.

Critics of Amazon cheered the European decision.

“Amazon, by using its very powerful position on e-commerce markets and its dual role as both retailer and marketplace, is making it more difficult for independent retailers to compete fairly,” said Agustin Reyna, director of legal and economic affairs at the European Consumer Organization, a group that has been urging regulators to act against Amazon.

Monika Pronczuk contributed reporting from Brussels.

Posted on

Big Tech Continues Its Surge Ahead of the Rest of the Economy

While the rest of the U.S. economy languished earlier this year, the tech industry’s biggest companies seemed immune to the downturn, surging as the country worked, learned and shopped from home.

On Thursday, as the economy is showing signs of improvement, Amazon, Apple, Alphabet and Facebook reported profits that highlighted how a recovery may provide another catalyst to help them generate a level of wealth that hasn’t been seen in a single industry in generations.

With an entrenched audience of users and the financial resources to press their leads in areas like cloud computing, e-commerce and digital advertising, the companies demonstrated again that economic malaise, upstart competitors and feisty antitrust regulators have had little impact on their bottom line.

Combined, the four companies reported a quarterly net profit of $38 billion.

Amazon reported record sales, and an almost 200 percent rise in profits, as the pandemic accelerated the transition to online shopping. Despite a boycott of its advertising over the summer, Facebook had another blockbuster quarter. Alphabet’s record quarterly net profit was up 59 percent, as marketers plowed money into advertisements for Google search and YouTube. And Apple’s sales rose even though the pandemic forced it to push back the iPhone 12’s release to October, in the current quarter.

On Tuesday, Microsoft, Amazon’s closest competitor in cloud computing, also reported its most profitable quarter, growing 30 percent from a year earlier.

“The scene that’s playing out fundamentally is that these tech stalwarts are gaining more market share by the day,” said Dan Ives, managing director of equity research at Wedbush Securities. “It’s ‘A Tale of Two Cities’ for this group of tech companies and everyone else.”

The results were strong despite increasing antitrust scrutiny from regulators. Last week, the Justice Department filed a lawsuit accusing Google of cementing the dominance of its search engine through anticompetitive agreements with device makers and mobile carriers. Facebook faces a possible antitrust case from the Federal Trade Commission.

The companies’ advantages are becoming more pronounced in an economy starting to dig out from the coronavirus pandemic. On Thursday, the Commerce Department said U.S. economic output grew 7.4 percent last quarter, the fastest pace on record, but remained below where it was in the last pre-pandemic quarter.

That slow return to health is also providing momentum to companies that suffered early in the pandemic, like Twitter, which reported on Thursday that revenue rose 14 percent in the third quarter as advertisers started to return. Twitter’s stock dropped about 14 percent in after-hours trading on Thursday, a reaction that analysts attributed to slow user growth.

Big Tech’s third-quarter boom could look modest when compared with the final quarter of the year. For Apple, it’s when consumers buy newly released iPhones. And the year-end shopping peak means lots of customers turning to Amazon for gifts, while advertisers rely on Google and Facebook for digital ads during the holidays.

The pandemic-fueled surge in online shopping pushed Amazon to a record for both sales and profits in the latest quarter.

Sales were $96.1 billion, up 37 percent from a year earlier, and profits rose to $6.3 billion.

The quarter did not include the usual boost from Prime Day, Amazon’s yearly deal bonanza, which was delayed to October. And the profit increased during a building boom, with Amazon expanding its fulfillment infrastructure by 50 percent this year. The company added almost 250,000 employees in the quarter, for the first time surpassing more than a million workers.

The lucrative Amazon Web Services division grew 29 percent as companies continued their shift to cloud computing.

Amazon said sales could reach $121 billion in the fourth quarter because of the confluence of Prime Day, the holiday shopping season and the turn to online spending.

The delay in the iPhone 12’s release meant Apple would face a tough comparison with the same quarter last year, which included sales of the iPhone 11. As a result, iPhone sales dropped more than 20 percent in the quarter.

Image
Credit…Michael M. Santiago/Getty Images

Yet Apple’s overall sales still rose 1 percent to $64.7 billion, showing the increasing strength of other parts of the company’s business.

Apple’s services segment, which includes revenues from the App Store and offerings like Apple Music, increased 16 percent to $14.5 billion. Sales rose 46 percent for iPads, 29 percent for Mac computers and 21 percent for wearables.

Profits fell 7 percent to $12.7 billion, partly because the company spent more on research and development.

“There are lots going on here, and everything is going incredibly well,” Luca Maestri, Apple’s finance chief, said in an interview.

Facebook’s revenue for the third quarter rose 22 percent from a year earlier, to $21.2 billion, while profits jumped 29 percent to $7.84 billion. The results surpassed analysts’ estimates of $19.8 billion in revenue and profits of $5.53 billion, according to data provided by FactSet.

Facebook had strong results despite a wide-ranging boycott by advertisers this summer over issues of hate and toxic speech on the site. Though the grass-roots campaign, Stop Hate for Profit, rallied many of the top advertisers on Facebook to reduce their spending, the overall effects were brief.

The company continued gaining users as well. More than 1.82 billion people used the Facebook app every day, up 12 percent from a year earlier, it said. More than 2.54 billion people now use one or more of Facebook’s family of apps — Instagram, WhatsApp, Messenger or Facebook — daily, up 15 percent from a year earlier.

After its first-ever decline in quarterly revenue in the second quarter, Alphabet rebounded with its highest-ever profit. The strength came from across Google, with search advertising revenue growing 6 percent and YouTube ad spending rising 32 percent. Google’s cloud computing business grew 45 percent.

When advertisers slowed spending with Google this year as Covid-19 started to spread, Alphabet’s business took a significant hit. But as the economy has improved and businesses found their footing, advertisers have returned.

Alphabet posted a net profit of $11.25 billion in the third quarter as revenue rose 14 percent to $46.1 billion. Ruth Porat, Alphabet’s chief financial officer, said the improved profitability reflected efforts to cut costs during the economic downturn, including a hiring slowdown.

Posted on

Paid Time Off, Free Fries: How Corporate America Is Getting Out the Vote

Bank of America is offering employees up to three hours of paid time to vote this year. The spirits company Diageo North America has declared a no-meeting day on Nov. 3. Best Buy is closing stores until noon that day, and PayPal is offering a half day, paid, to workers who volunteer at polling places.

Less than two weeks before the general election, corporate America is having a civic awakening, with thousands of companies encouraging voter participation by offering their workers paid time off, voter-education tools and interactive sessions on how elections work. Some are even providing marketing and free legal advice to local election boards or nonprofit get-out-the-vote groups.

“Companies can’t do everything, but we can function in civil society in a way that really helps to encourage and enable civic participation,” said Franz Paasche, head of corporate affairs at PayPal, where the efforts have varied from paid time off to hosting a speaker series on elections.

Two years ago, when executives from PayPal, Patagonia and Levi Strauss founded Time to Vote, a nonpartisan project that asks companies to encourage workers to participate in elections, there were around 400 members. In recent weeks, membership has shot up to more than 1,700. A similar initiative, called A Day for Democracy, has attracted more than 350 companies since it began with seven Boston-area companies in July. ElectionDay.org, sponsored by the nonprofit organization Vote.org, has gathered pledges from more than 800 companies promising employees paid time to vote.

Most companies are quick to say that their goal isn’t to wade into politics or get any particular candidate into office. Rather, many executives say that they were galvanized by recent upheavals that have put issues of race and gender discrimination, economic inequality, climate change and other topics at center stage for employees and customers, and voting is a way to take a stand.

Keep up with Election 2020

“The Black Lives Matter and the civil unrest has been a call to arms for C.E.O.s in terms of informing corporate behaviors and civic actions,” said Peter Palandjian, a private-equity executive in Boston who started A Day for Democracy with commitments from the Red Sox and Bank of America. “And I think that’s what’s very different this year.”

Earlier this week, Goldman Sachs announced that it would give workers up to half a day off to vote, paid, for the first time. Other companies that have offered paid time to vote in the past, including Citi and Gap Inc., have announced that they’re providing additional paid hours if needed as well as voter-education resources this year.

The extra hours are likely to be necessary given that a record turnout is expected this year, which could mean long lines and additional safety procedures in light of the pandemic. In anticipation, Diageo North America, which owns brands like Guinness and Smirnoff, is changing course and allowing employees to take whatever time they need to vote without a written request. Previously, employees were given up to two hours of paid time off to vote, which they had to request in advance. The company also plans to set up a team for workers to call if they run into any trouble casting their ballots, said Laura Watt, its executive vice president of human resources.

Some companies are hoping to encourage voter turnout in general. Shake Shack is giving away free french fries to customers who vote early. Tory Burch, the clothing label, designed a T-shirt that reads “VOTE,” the proceeds from which go to a nonpartisan get-out-the-vote project called I Am a Voter. Coca-Cola dispatched a team of marketers to create public-service announcements on the importance of early, in-person voting that ran on radio, television and at bus shelters around its home state of Georgia; broadcast spots featured the voices of Ed Bastian, chief executive of Delta, the Atlanta Hawks forward Cam Reddish and other local celebrities.

Corley Kenna, who runs communications at Patagonia and co-founded Time to Vote, took advantage of additional benefits her employer is providing this year to work at election sites in Atlanta, her hometown, with two colleagues. Between morning and afternoon shifts at the State Farm Arena and the Southwest Arts Center this month, she caught up on work.

“I think it is on all of us — the private sector, nonprofit, academia — to help provide safe and secure elections,” said Ms. Kenna, a Democrat and environmental advocate who was a senior adviser in the State Department under President Obama.

Image
Credit…Audra Melton for The New York Times

Old Navy, the biggest brand owned by Gap, said it would pay employees to be poll workers, on top of what they get paid by county election commissions. The retailer said it hoped its policy would fuel voter turnout among its young store staff, more than 60 percent of whom are between the ages of 18 and 29. Levi’s extended its paid time off for voting to poll worker training this year and has been featuring environmental and racial justice activists on its Instagram account to talk about voting.

The push by retailers and restaurant chains is significant because it can be especially difficult for hourly workers to find time to vote. After health care, retail is the second-biggest private sector employer in the United States.

In addition to making sure that their efforts are not being seen as partisan externally, companies have been careful about how they communicate internally. Diageo North America has been holding weekly events in the run-up to the election with the African heritage group and women’s network, for example, discussing the issues at stake for their communities, but in a “neutral way,” Ms. Watt said. “We’ve been very clear about not being partisan or not having a particular view leaning one way or another,” she said.

Still, not every company is being so proactive. Workers at Amazon, who have been pushing unsuccessfully for a paid day off to vote, are threatening to shut down warehouses temporarily on Oct. 31 if the e-commerce giant doesn’t meet their demands. And on Thursday, Vote.org, a digital platform that helps people register to vote online and provides information about polling sites, called on more than two dozen companies that have not yet committed to giving workers time off to do so. It cited Pew Research Center statistics from 2014 showing that in the past, 35 percent of registered voters didn’t vote because of work or school conflicts.

Tory Burch, which employs nearly 3,000 people in the United States, was one of the few companies offering employees paid time off to vote in 2016, when its founder wrote an op-ed encouraging other company bosses to do the same. At the time, fellow chief executives, some from Fortune 500 companies, told Ms. Burch that they couldn’t follow suit because doing so would be regarded as a partisan act, intended to favor Democratic candidates.

The feedback was “eye opening,” Ms. Burch recalled, given that “encouraging Americans to use their vote is patriotic and not a Democratic initiative.” This year, she is closing all stores and offices on Nov. 3 and encouraging her staff to volunteer as poll workers, believing that the employee good will it generates far outweighs the lost revenue.

In a note to employees Thursday morning reminding them of their options to take paid time off to vote, Jamie Dimon, the chief executive of JPMorgan Chase, talked about the importance of a smooth political process.

“The peaceful and stable transition of power — whether it is to the second administration of a president or a new one — is a hallmark of America’s 244-year history as an independent nation,” Mr. Dimon wrote, adding that while he acknowledges the “tremendous passion and strong opinions” that have played into the current race, respecting the democratic process “is paramount.”

Michael Corkery and Karen Weise contributed reporting.

Read More

Posted on

Forget Antitrust Laws. To Limit Tech, Some Say a New Regulator Is Needed.

For decades, America’s antitrust laws — originally designed to curb the power of 19th-century corporate giants in railroads, oil and steel — have been hailed as “the Magna Carta of free enterprise” and have proved remarkably durable and adaptable.

But even as the Justice Department filed an antitrust suit against Google on Tuesday for unlawfully maintaining a monopoly in search and search advertising, a growing number of legal experts and economists have started questioning whether traditional antitrust is up to the task of addressing the competitive concerns raised by today’s digital behemoths. Further help, they said, is needed.

Antitrust cases typically proceed at the stately pace of the courts, with trials and appeals that can drag on for years. Those delays, the legal experts and economists said, would give Google, Facebook, Amazon and Apple a free hand to become even more entrenched in the markets they dominate.

A more rapid-response approach is required, they said. One solution: a specialist regulator that would focus on the major tech companies. It would establish and enforce a set of basic rules of conduct, which would include not allowing the companies to favor their own services, exclude competitors or acquire emerging rivals and require them to permit competitors access to their platforms and data on reasonable terms.

The British government has already said it would create a digital markets unit, with calls for a Big Tech regulator to also be introduced in the European Union and in Australia. In the United States, recommendations for a digital markets regulator have also been made in expert reports and in congressional testimony. It could be a separate agency or perhaps a digital division inside the Federal Trade Commission.

Significantly, the leading proponents of this path in the United States are mainstream antitrust experts and economists rather than break-’em-up firebrands. Jason Furman, a professor at Harvard University and chair of the Council of Economic Advisers in the Obama administration, led an advisory group to the British government that recommended the creation of a digital markets unit in 2019.

Image
Credit…Zach Gibson/Getty Images

Breaking up the big tech companies, Mr. Furman said, is a bad idea because that would risk losing some of the consumer benefits these digital utilities undeniably deliver. A regulator is necessary to police digital markets and the behavior of the tech giants, he said.

“I’m a small ‘c’ conservative, and I’m not a fan of regulation generally,” Mr. Furman said. “But it’s needed in this space.”

Regulators that focus on specific sectors of the economy are common in the United States. For financial markets, there is the Securities and Exchange Commission; for airlines, the Federal Aviation Administration; for pharmaceuticals, the Food and Drug Administration; for telecommunications, the Federal Communications Commission; and so on.

There is also precedent for picking out a handful of big companies for special treatment. In banking, the biggest banks with the most customers and loans are classified as “systemically important financial institutions” and subject to more stringent scrutiny.

Several supporters of a new tech regulator were officials in the Obama administration, which was known for being friendly to Silicon Valley. But the advocates said that experience — as well as the conservative, pro-big business drift of court rulings in recent years — left them frustrated with antitrust law as the only way to restrain the growing market power and conduct of the big tech companies.

“The mechanism of antitrust is not working to protect competition,” said Fiona Scott Morton, an official in the Justice Department’s antitrust division in the Obama administration, who is an economist at the Yale University School of Management. “So let’s do something else — use a different tool.”

Ms. Scott Morton led an expert panel on antitrust in a report last year on digital platforms by the Stigler Center at the University of Chicago’s Booth School of Business. The report recommended the creation of a regulatory authority. (Ms. Scott Morton has been a forceful critic of Google, but also a consultant to Apple and Amazon.)

Such a regulatory approach carries the risk of government’s meddling in a fast-moving industry that could hobble innovation, some antitrust experts warned. While antitrust law reacts to alleged anticompetitive behavior and can thus be slow, that shortcoming is preferable to prescriptive government rules and regulations, they said.

“I’m very uncomfortable with the regulatory path, especially if it means things like getting government approval for product changes,” said Herbert Hovenkamp, a professor at the University of Pennsylvania Law School. “The history of regulation shows that it is an innovation killer.”

A. Douglas Melamed, a former general counsel of Intel and a former antitrust official in the Justice Department, shared that concern. But Mr. Melamed, a member of the expert panel for the Stigler Center report, said the tech giants did pose a competition problem.

“I think regulation might make sense if it is narrowly focused, not running the industry,” said Mr. Melamed, who is a professor at Stanford Law School.

The last major antitrust action against a big technology company was the landmark Microsoft case in the 1990s. The case began with a suit filed in 1994 by the Federal Trade Commission and a simultaneous consent decree.

The Justice Department and several states later picked up the pursuit, investigated anew, filed suit and conducted an exhaustive trial. Microsoft was found to have repeatedly violated the nation’s antitrust laws, and the company then reached a settlement with the government, which a federal court approved in 2002.

In the Microsoft case, the antitrust legal process worked, in its way. Yet its impact is still debated. Without the suit and years of scrutiny, some observers said, Microsoft could have throttled the rise of Google.

Image

Credit…Stephen Crowley/The New York Times

But others said the technological shift toward the internet and away from the personal computer meant that Microsoft had lost the gatekeeper power it once held. Technology, not antitrust, they insisted, opened the door to competition.

Triumph or not, the Microsoft case was two decades ago. Proponents of a new regulator said antitrust law was ill suited by itself to restraining today’s faster-moving digital giants. In the internet economy, they said, the forces that reinforce and expand the power of a market leader — called network effects — are stronger and more rapid than in the personal computer era.

“Antitrust is not a fully adequate tool to deal with the companies that dominate these markets,” said Gene Kimmelman, who was on the Stigler Center panel and a co-author of a recent report by the Shorenstein Center at Harvard that called for the creation of a “digital platform agency” in America.

Another argument for the regulatory option is that competition concerns now span four companies, not just one. Apple, Amazon, Facebook and Google are in different markets, including search, online advertising, e-commerce and social networks. Bringing separate antitrust cases against them would most likely be beyond the resources of the government.

“When the competition issues are larger than a single firm, regulation might be the better tool to use,” said Andrew I. Gavil, a law professor at Howard University.

Posted on

Customers Still Like to Shop in Person, Even if They Get Only to the Curb

When the pandemic forced Dick’s Sporting Goods to close its hundreds of stores in March, the retailer hustled to set up curbside pickup within two days. Its initial attempt, though, was just this side of a children’s lemonade stand.

“When you drove up, there was a sign in the window with a phone number, and people used the landline to call the stores and they’d deliver it out,” Lauren Hobart, president of Dick’s, said of the “very scrappy” operation. Email and text alerts would come later.

Scrappy or not, curbside pickup not only rescued Dick’s sales during the lockdowns, it has also emerged as many retailers’ best strategy for long-term survival in the e-commerce age. And what started as a coronavirus stopgap is likely to have a permanent impact on the way people shop, along with giving them a new reason to continue to visit beleaguered physical stores.

The popularity of curbside pickup reveals that the future of retail is not just more packages piling up on people’s doorsteps. Beyond satisfying the need for contactless shopping in the pandemic, it taps into Americans’ desire to drive to a store, a pull that can be just as strong as, or even stronger than, the convenience of home delivery.

“Americans are used to their cars and actually do like stores, so this is kind of a hybrid where you’re getting the best of both worlds,” said Oliver Chen, a retail analyst at Cowen.

As of August, about three-fourths of the top 50 store-based retailers in the United States offered curbside pickup, according to Coresight Research, an advisory and research firm that specializes in retail and technology. Anything from a sweater to a book is now as easy to pick up as a sandwich.

Image
Credit…Amr Alfiky/The New York Times

Target said its curbside sales grew more than 700 percent in the last quarter, while Best Buy reported nearly $5 billion in online revenue in the second quarter, a company record, and said 41 percent of that had come from curbside or in-store pickup.

The rise in curbside pickup, part of a larger surge in e-commerce sales, has implications for preserving retail jobs, though workers’ duties are likely to transform. It is also helping to keep brick-and-mortar spaces relevant when thousands of storefronts have emptied out as more customers move online.

Curbside allows certain big-box retailers to convert their stores into mini e-commerce fulfillment centers, while avoiding the money-losing step of shipping goods to homes.

By driving to the store to pick up an online order, “the customer takes the last mile,” Mr. Chen said, referring to the typically expensive final step in package deliveries.

The rising popularity of curbside coincided with Amazon’s struggles with its vaunted supply chain and usually seamless home delivery system in the early months of the pandemic. As people rushed to place orders for everything from toilet paper to backyard swimming pools, Amazon dealt with out-of-stock items, price gouging and delayed or inaccurate shipments.

That was a boon for chains like Dick’s, Best Buy, Target and Walmart, which harnessed the merchandise in their thousands of stores to new effect especially as summer began.

“Amazon struggled a bit at the beginning like everybody did, because, boom, when the demand came, it was so great it hit the whole system and kind of overwhelmed it,” said Walter Robb, a former co-chief executive of Whole Foods and executive-in-residence at S2G Ventures, a venture fund focused on food. “Those that have been able to be agile on their feet with these digital offerings have made some gains.”

But nowhere is the shift more significant than at big-box chains that also sell groceries. The 700 percent growth in Target’s Drive Up offering has spurred the chain to add fresh and frozen groceries to the service and create up to 12 additional parking spaces for pickup at stores. It has announced plans to double the number of store employees dedicated to in-store and curbside pickup services during this holiday season. The retailer has even included product samples in orders.

Image

Credit…Amr Alfiky/The New York Times

Walmart, with about 4,700 stores in the United States, was one of the earliest chains to offer curbside pickup, with a focus on groceries. Curbside orders are part of an overall boost in its e-commerce sales, which accounted for 11 percent of the chain’s revenue in the quarter that ended July 31, up from 6 percent a year earlier.

It’s helping the retailer keep pace with Amazon online, though the gap between the two remains large. Mr. Robb noted that Amazon seemed to be expanding its own physical footprint — through its ownership of Whole Foods and a partnership with Kohl’s — to match Walmart on curbside.

The drive-up service is giving Walmart and other chains another significant advantage — the ability to make a profit on online orders, where the economics are notoriously difficult. Target has said that its order pickup and curbside services at stores cost the company about 90 percent less on average than fulfilling orders from a warehouse.

On a $100 curbside order, the labor costs of picking the groceries reduce Walmart’s profit by $1.50 while still leaving $3 in profit, estimated Edward Yruma, an e-commerce analyst at Keybanc. By comparison, Walmart loses money on its traditional e-commerce sales, in which customers order online and the products are shipped to their home, Mr. Yruma said. In its recent second-quarter-earnings report, Walmart said that it had “significantly reduced losses” in its traditional e-commerce business.

Walmart now employs 74,000 workers across more than 3,000 stores to pick groceries on orders and then take them out to customers’ cars. Five years ago, there were fewer than 1,000 of those jobs. But during the pandemic, filling those roles was a big driver behind Walmart’s hiring boom, which increased the company’s 1.5 million-person work force by 14 percent.

That is a significant number for the nation’s largest private employer, particularly at a time when the economy has been shedding jobs.

But some retailers are not hiring more employees to pack online orders — they are simply adding these tasks to the workers’ workloads without increasing their pay. In fact, many retailers have ended the raises and bonuses that workers were receiving in the early months of the pandemic, a decision labor groups have criticized because workers now face both heavier workloads and the threat of contracting the virus in the store.

Image

Credit…Amr Alfiky/The New York Times

“If you are having an increase in sales and in productivity, the workers should share in that benefit,” said Marc Perrone, president of the United Food and Commercial Workers union, representing tens of thousands of grocery store workers. “Right now, the owners of these companies are the only ones benefiting.”

Labor experts and Wall Street analysts also predict that the job of picking items off the shelf and taking them to a customers’ cars can easily be done by machines, which means that the boom in jobs may be fleeting.

Even now, that work is highly automated. Workers fulfilling curbside orders at Walmart use a hand-held device that indicates the order in which they should pick each item, for maximum efficiency.

“They can sometime feel like robots,” Mr. Perrone said.

A recent report by the Labor Center at the University of California, Berkeley, and the nonprofit Working Partnerships USA predicted that workers would come under new pressure as stores began to resemble Amazon warehouses, and noted that “stock clerks’ jobs seem destined for more radical change than any of the other major retail job categories.”

“On the store floor, they also will be more frequently prompted by ‘alerts’ to replenish stock,” the report said. “As with cashiers, this could make stocker jobs more varied and interesting, but in combination with new ways of tracking work, it also could result in jobs that are surveilled, closely watched, sped up and stressed.”

Jean-André Rougeot, chief executive of Sephora Americas, said that on a recent visit to Walmart, he saw more employees pushing carts for pickup orders than he did shoppers. He anticipates that people will return to Sephora’s stores to touch and try its beauty products, but acknowledged that the pandemic would transform how people shopped and received goods.

Image

Credit…Amr Alfiky/The New York Times

“Every grandparent in America knows how to use Zoom now because that’s how they spoke to their grandkids for the last six months, so it’s not just young people,” Mr. Rougeot said. “The whole population has become much more comfortable with technology and the ability to order things differently.

“There’s a whole group of consumers that literally discovered e-commerce during this period,” he added. “These people, because of Covid, started to do that, and I don’t think you can put the genie back in the bottle.”

Contact Sapna Maheshwari at sapna@nytimes.com and Michael Corkery at michael.corkery@nytimes.com.

Read More