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Amazon, challenged by pay disputes in Germany, sets up distribution centers in Poland. Oh, and faces more flack in France.

October 9th, 2013 |  Published in Amazon, Brands and branding

Amazon distribution centers

By:  Catarina Conti

9 October 2013 – Amazon, battling a pay dispute in Germany, is set to open three logistics centers in neighboring low-cost Poland. The company said the new sites would help meet growing customer demand across Europe and would not affect its eight German logistics centers.  But … at the outset the new Polish sites will mainly serve Amazon’s German business, before later focusing more on other fast-growing European markets.

The news is potentially unsettling for Amazon’s German workers, who are engaged in a bitter pay dispute that has triggered strike action at distribution facilities in Bad Hersfeld and Leipzig. Verdi, the German services trade union leading the labor dispute, has warned that Amazon should expect disruptive labor stoppages in Germany over the Christmas delivery period if its demands are not met.

In its press releases and media chats (we attended one in Warsaw) Amazon cites Poland’s central location in Europe, close connection to key markets and “access to a great employment base” as key reasons for the investment decision, whose cost it did not quantify. It says that these new logistics centers would “ensure Amazon continues to keep its promise of prompt and reliable delivery to European customers . . . especially during the ramp-up phase before the holiday season”. Media analysts have said that despite the financial turn-down across Europe, they expect a banner year in e-commerce sales.

Amazon has been in a “damn-if-we-do-damn-if-we-don’t” situation for a few years. In spite of creating thousands of jobs in Europe at a time of economic stagnation it has faced repeated criticism about its working practices, which rub up against traditional European labor relations norms (although times might be a-changin’. See end note below).

The numbers?  Employees at Amazon’s German logistics centers earn at least €9.55 per hour and €10.47 per hour after a year in the job, which the company argues is a competitive rate in the logistics industry. Verdi says that Amazon is a mail order business and should be bound by a collective pay agreement for that sector, which stipulates pay of between €11.47 and €11.94 per hour. The union also wants Amazon to put more employees on permanent, not fixed-term, contracts.

The three Polish distribution centers are expected to create about 2,000 jobs, plus an additional 3,000 seasonal jobs at each center to cover peak demand periods. Two of the centers will be built near Wroclaw in southwest Poland, about 270km from the German city of Dresden. The other will be situated near the city of Poznan, which is a similar distance from Berlin. Perfect.

Verdi has been playing down news of the Poland expansion, noting that Amazon is also building a new logistics center near Berlin. The Verdi official was quoted as saying there is “no evidence” that Amazon wanted to fan fears among German employees … but could not rule that out. If I was a German employee I would certainly be unnerved by reports (in the Polish press) that Amazon planned to outsource jobs from Germany. Poland is becoming a popular destination for distribution centres, which are springing up along new highways that cross the country and link it tightly to western Europe.

Meanwhile in France …

The French parliament has passed a law preventing internet booksellers from offering free delivery to customers, in an attempt to protect the country’s struggling bookshops from the growing dominance of Amazon. Aurélie Filippetti … France’s culture minister who originally proposed the move … denounced Amazon for its alleged “strategy of dumping”, claiming that the company used offers of free delivery to get around French laws controlling the price of books: “Once they are in a dominant position and have wiped out our network of bookshops, it is a strong bet that they will raise their delivery charges.”

The new law … which still needs to be ratified by the Senate … is the latest move by France against U.S. internet companies, which it believes are unfairly using their market power to overwhelm local competition. French President François Hollande has been lobbying the EU to regulate online platforms and applications and is pushing for international agreement on taxing internet companies such as Google, Facebook and Amazon in the countries where customers use their websites.

Defending France’s cultural assets against the perceived threat from U.S. products and companies has strong cross-party support. All main parties supported the new law, which will be added to legislation that allows a maximum 5 per cent discount on the centrally-fixed single price for books.

Amazon has attacked the new law (SURPRISE!) saying all measures that increased the price of books damaged the purchasing power of French consumers and discriminated against those shopping on the internet. In a statement the company said: “The impact will be greatest both on the depth of the catalog offered to consumers and on small publishers for whom the internet represents a big part of their business”.

French politicians on the left and right have expressed concern about the fate of France’s strong tradition of independent bookshops in the face of fast-rising internet sales, which had captured 13 per cent of the market by 2011, according to figures in a parliamentary report. Amazon claims some 70 per cent of the online sales.

The plight of independent booksellers is yet another example of Joseph Schumpeter’s concept of “creative destruction,” which describes situations in which technological innovation expands the range and affordability of products available to consumers at the expense of traditional suppliers. Bookselling is an industry suffering through the tribulations of digital transformation as e-books and Amazon have upended longstanding business models and put new emphasis on price. The decimation of the book market in the U.S. … and now also in the UK which media analysts say has lost 250+ independents in the last few years … via book “superstores” and the “showrooming” phenomenon is something French publishers do not wish to repeat. In the U.S., if the recent DOJ/Apple e-book case is any measure, they key is cheap book prices above all else.

Working and living here in Paris we quite relish our tradition of independent bookshops with their wealth of diverse content. And research has shown that the percentage of those who discover new titles in a physical bookstore far outstrips that of those who learned about a new book online. Amazon and other e-tailers and their homogenized attitude of “only stock what sells” is anathema to us. Algorithms are still a pale substitute for a bookseller’s insight, knowledge and passion. Our neighborhood bookstores are where customers come to experience firsthand a deeper connection with authors, great writing, ambience, the expertise of their local bookseller and their own community. It ain’t about the money.

Will it change in France? It might. Bookshops remain in a difficult situation because of their rents, personnel charges and the cost of their stocks. But the battle will continue, most likely on the financial front. In an open parliament session on the e-commerce industry and tax I learned that Google, Apple, Facebook and Amazon between them had between €2.2bn and €3bn sales in France, but were able to reduce their reportable income so they paid on average only €4m in tax each. Earlier this year, Hollande forced Google into pumping €60m into the country’s ailing newspaper industry by threatening to introduce legislation to force the search engine to share its revenues from links to French media articles, although another proposal to impose a tax on the sale of internet-connected devices to help fund French films and TV production has been dropped.

The battle continues.

And a brief end note …

In France, we love our Sunday closing laws. Trade unions have been successfully using the courts to try to clamp down on deviations from both Sunday and evening work restrictions.

Well, up to now.

A revolt by French retailers and employees against restrictions on Sunday opening that they say constrain jobs and growth has forced France’s Socialist government on to the defensive at a time of record unemployment and feeble economic activity. Two large DIY retailers, Leroy Merlin and Castorama, just opened 14 of their stores in the Paris region on Sunday in defiance of a court ruling issued ordering their closure.

And the surprise? Dozens of their employees joined demonstrations in favor of Sunday opening under the slogan “Yes Weekend” … which to French ears sounds close to “Yes We Can”, Obama’s campaign slogan.

The rebellion followed a similar court order issued this month forcing Sephora, a cosmetics emporium on the prestigious Champs-Elysées in Paris, to close its doors every day at 9pm. A trade union sought the order to stop Sephora, owned by LVMH, the world’s leading luxury goods group, from staying open until midnight and beyond, as it had been doing with the support of its workers.

The prime minister was in a mad scramble. His office has to shoot off a statement that Sunday “rest” remained an “essential principle of worker protection and social cohesion”, but the government had appointed a commission to examine “the weaknesses of the current rules”. In the meantime, it said the law must be respected.

For retailers, a big frustration is the “Kafkaesque millefeuille” of rules that apply, as Les Echos, the business daily, put it. Garden centres and furniture stores are allowed to open all day on Sunday, while food stores can open for half the day. But DIY stores and other retailers must stay shut. Some retailers are allowed to open on Sunday in designated tourist areas, such as the Champs-Elysées.

With unemployment at close to 11 per cent of the workforce and growth struggling to recover from recession, the court orders have sparked rising demands, including from affected workers, for change. Advocates of Sunday opening say tens of thousands of new jobs could be created. More and more I read on the social media circuit “the decision to shut stores is completely at odds with the rhythm of contemporary life, especially in Paris. We are no longer in the 19th century. There are workers who want to work and there are consumers who cannot shop apart from at the weekend.”

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