The Downside Of E-commerce

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Joined: Fri Dec 29, 2017 10:47 am

Fri Jul 13, 2018 7:25 pm

When we read or hear about e-commerce, we mostly hear the good stuff. How you can buy goods with one click for example, or how the same goods will be delivered within 24 hours. The biggest selling point is convenience, how you can get whatever you need without ever leaving your house. But there's more to these online stores than meets the eye. Behind the efficient, automated websites are humans working hard to fulfill the orders. Sometimes, these humans work under less than acceptable conditions.

With the penetration of internet and mobile money, Africa has witnessed a boom in online commerce. The main companies, mainly backed by foreign venture capitalists, include Konga, Kilimall, Jumia and Bidorbuy. Though still angling for a larger share of the pie, they have been posting double digit growth rates for years. This growth, on the face of it, seems good for the economies of African countries, but does it come at a steeper cost? For answers, let's look at Amazon.

Amazon is now the world's largest retailer by revenue. It is no wonder that its founder Jeff Bezos is also the world's richest man as at 2018, with his personal fortune estimated at over $120 billion, and rising, thanks to a rise in the value of Amazon stock. To achieve this feat, has depended heavily on technology and economies of scale. Amazon fulfillment centres are so huge that some are as large as tens of football fields put together. These fulfillment centres host millions of products, which are fetched and packed by employees for delivery. The employees are said to work in sweatshop like conditions. They are normally on their feet for up to 10 hours daily, they cover tens of miles walking around the centre to fetch products, and are punished for taking rests, even when they go for surgery. Amazon has also been accused of making sure tens of thousands of its employees never gain permanent status. They do this by employing temporary workers, then firing them after around 12 weeks, only to later re-hire them. This is because the law requires an employee who has worked for more than 12 weeks at the same place to be hired permanently. They are also constantly watched by hawk eyed supervisors, who reprimand them for various minor infractions. They're also reminded that they're easily replaceable. It is extremely hard to come across an employee at any Amazon fulfillment centre who enjoys the job.

The warehouses are manned by both humans and robots. Though robots have not achieved human like characteristics, they're already taking over some jobs that were traditionally done by humans. The increasing interest by tech companies in AI (Artificial Intelligence) suggests in the coming decades computer programs are going to replace humans in many workplaces. AI is already being implemented in transportation (self driving cars), assembly lines, power grid management, in call centres and personal assistant positions (pioneered by programs such as Siri, Google Assistant and Cortana). Amazon, after forcing many brick and mortar stores to close shop due to their inability to compete with the online giant on price, is now going ahead with plans to open its own cashier-less brick and mortar stores!!!

Proponents of AI argue that it will only take over jobs that humans find boring, and/or monotonous, leaving them to pursue jobs they're really interested in. They also argue that the efficiency that AI brings will give rise to new, yet unknown jobs that will be better than the ones currently being lost. They might have a point, but the fact right now is that, in a world with high rates of unemployment, AI is rendering even more people jobless. Imagine a future whereby you instruct Siri, Cortana, or Google Assistant to buy you something online, only for a robot to fetch, pack and load it onto a driverless vehicle or drone that will deliver it to your doorstep. That process, from order to delivery, will not have any human interaction. This is good news for the corporations that want to cut costs, but not for people who could have gained from those jobs.

Other downsides of e commerce, apart from forcing smaller players to shut down, include:
1. Too much power due to their sheer size and the accompanying economies of scale. American towns nowadays campaign fervently to host Amazon fulfillment centres.
2. Mistreatment of employees. While negotiating with these towns, Amazon is granted special status, which makes it get away with conditions that would otherwise not be tolerated.
3. Too much dependence on one player. After forcing others to shut down and remaining as the only sheriff in town, the residents become too dependent on the company for their survival.
4. Reduced taxes in the long term. In my opinion, it is better to collect taxes from several small companies than from one giant. This is because the giant can come up with creative ways of evading tax, or demand tax exemption due to the aforementioned dependence on it by the host town.

Looking at Amazon as a case study, and assuming African e commerce companies will implement the same tactics here, online stores suddenly don't look as glamorous as they are painted.