Author: Max Garland – Business Reporter
It’s not just retailers that consider Amazon an 800-pound gorilla.
Companies involved in the transportation, storage and distribution of products know their industry also revolves around the e-commerce giant, according to Andy Rogers, chief operating officer of Direct Answer, which has a distribution center in West Virginia’s Eastern Panhandle.
“For better or for worse, Amazon is the dominant player,” he said. “You have to find your sweet spot.”
As Amazon has spearheaded the e-commerce movement, the need for more hands in the warehouse and distribution industry has risen to keep up with online orders. West Virginia has been one of the biggest benefactors of that trend in terms of job growth, according to data from the Bureau of Labor Statistics compiled by the Associated Press.
West Virginia’s general warehousing jobs, or jobs at private companies who primarily operate merchandise warehousing and storage, totaled 3,638 in 2016, says the data. That’s nearly triple the figure of West Virginia’s 1,333 general warehousing jobs in 2007. The data counts both full- and part-time jobs in its figures.
The state’s job growth in this sector outpaced all but three states, the data says. That’s despite being the only top 10 state in general warehousing job growth to experience a loss in private sector jobs since 2007.
In other words, the rise of warehouse jobs in West Virginia isn’t just because of overall job growth, according to Dr. John Saldanha, an associate professor of supply chain management at West Virginia University.
Michael Carroll, chief operating officer of Huntington-based REO Logistics, said the logistics service company has doubled its workforce in the past three years to roughly 400 employees.
“Take a look around the state, there’s people willing to work here and you can do that cheaply,” he said, pointing out Macy’s locating an e-commerce distribution center in Martinsburg.
Saldanha echoed Carroll’s reasoning about West Virginia’s low cost of real estate and labor making for an appealing combination in a rapidly expanding industry. Warehouse businesses operate on thin enough margins as it is, he said, and salary makes up a large portion of their expenses.
Rogers also cited similar reasons, noting that Direct Answer, with its headquarters in Maryland, may have located its 35,000-square-foot distribution center elsewhere if not for West Virginia’s benefits.
Direct Answer, which Rogers says currently employs about 15 people, provides marketing, advertising and database administration services, but its distribution center in Capon Bridge focuses primarily on online ordering. Clients can have their products stored and distributed from the center instead of having to handle their own product logistics, he said.
The center integrated with Amazon, eBay and several other e-commerce companies, since many of its clients have online orders fulfilled through those companies and not on their own websites, according to Rogers.
“E-commerce has changed everything,” Rogers said. “You used to have to start by ordering things out of a catalog, now it’s a huge network of companies you need to connect with.”
Amazon has looked at acquiring the distribution center in the past, Rogers said, but the company wants to remain independent. Amazon’s interest isn’t a surprising development, according to Saldanha.
“Larger companies see smaller ones as a way to serve and connect to a larger region,” he said. “A lot of warehouses are operating at thin margins. They may have trouble expanding. The deep pockets of Amazon gives it an advantage over the rest.”
Small businesses like Direct Answer are best served adapting to, rather than scaling up, with Amazon if they want to remain on their own two feet, Saldanha said.
Rogers said that’s what the company is planning to do. Direct Answer mostly works with smaller businesses for their distribution needs, including a client who makes child safety devices for cars and a startup that manufactures electric mopeds, he said.
“It’s very tough, so we have to find what we can do best,” Rogers said of competing in a sector involving Amazon. “If someone has started a T-shirt company out of their garage, we’re here to reach out to them about delivery possibilities. That’s who we look for.”
However, Direct Answer has worked with large-scale clients before, handling the distribution of products related to Ben Carson’s 2016 presidential campaign, including posters, banners, socks and other items, according to Rogers. The company had to bring in additional employees to handle the additional workload, sometimes reaching 2,500 orders a day at the height of Carson’s campaign, he said.
“When the [Carson] campaign was going we were running 24/7 with three to five people a shift,” Rogers said. “The orders were constant, but with the nature of a presidential campaign we didn’t know when he would end it, so we knew the workers we brought on would be part time.”
Carroll said REO Logistics, which also has locations in Nitro and Parkersburg, also isn’t looking to compete with Amazon directly in general e-commerce. Instead, it’s focusing more on niche areas such as the distribution of chemical goods and industrial products in small quantities.
The order entry, fulfillment and packaging of chemicals requires more expertise than general goods distribution does, Carroll said, meaning Amazon’s influence is limited at best in that area.
The growth of warehouse jobs, part-time or otherwise, aren’t likely to slow down anytime soon, as people continue to shop more online and want their orders to be delivered quicker, according to Saldanha.
“Available warehousing capacity is going to have trouble keeping up with demand,” he said.
The industry’s growth has often been viewed as part of the solution to fill the void left by disappearing retail jobs, as noted by a post by Affiliated Warehouse Companies.
Retail jobs remain a big player in West Virginia, despite a busy year for store closings. In 2016, the industry had 86,765 employees in West Virginia, according to estimates from WorkForce West Virginia. That number is expected to drop to 84,560 in 2024.
But with more companies looking to replace human labor with machine labor, the warehouse industry may not replace all those lost jobs, according to Saldanha.
“I would love to say retail jobs can be easily replaced, but we need to make a change in what we train people for,” he said. “We need higher skills training in areas of automation operations.”
Jobs with e-commerce companies may be limited as well, particularly in West Virginia. The state had 802 e-shopping jobs in 2016, which ranked 30th among states, according to the data compiled by the AP.
Most, if not all of those jobs, are likely with the Amazon Customer Service Center in Huntington, as the company was projected to employ 600 people at the center by the end of 2014, according to a West Virginia Department of Commerce post. Amazon did not respond to a request for comment regarding the center’s current job numbers.
Although the industry is beginning to rely more on technology, Carroll said future members of the workforce should be able to quickly adapt to those needs because they “have had a phone in their hands all their lives.”
“You need an investment in both people and software,” Carroll said of the e-commerce industry. “It’s about finding educated people who are familiar with some of the technology you’re working with.”
Reach Max Garland at firstname.lastname@example.org, 304-348-4886 or follow @MaxGarlandTypes on Twitter.