3 strategies for companies concerned about Amazon wage hike
Small businesses located near Amazon's order fulfillment centres compete with the company for staffers
NEW YORK – Amazon’s plans to pay all its U.S. employees at least $15 an hour is putting pressure on small business owners, even those who aren’t retailers directly competing with the huge company.
“Amazon is giving a kick in the butt to a lot of business owners to increase compensation,” says Gene Marks, owner of The Marks Group, a small business consulting firm in Bala Cynwyd, Pennsylvania.
Small businesses located near Amazon’s dozens of order fulfillment centres vie with the company for staffers, and the competition will become even fiercer during the upcoming holiday season, when Amazon needs an extra 100,000 people to pack and ship boxes.
Amazon is “doing what they need to do to get employees,” Marks says.
The company, whose market value briefly topped $1 trillion last month, has another motive – placating critics including some politicians who have called on Amazon to give its employees a raise.
The strong economy and shrinking labour pool has made workers hard to find for employers of all kinds, including big retail chains, fast-food restaurants and small businesses. Some are boosting pay. But higher wages are harder for small businesses to absorb because they don’t have the massive revenue stream of a company like Amazon.
Meanwhile, small retailers who sell on Amazon expect the internet giant to increase the fees it charges them to help fund the salary increases. But small business consultants, and owners themselves, say strategizing can help lessen the pain.
Here are three things small business owners need to know about Amazon’s wage hike:
AN ADVANTAGE WHEN HIRING
A small business can be more flexible than a huge company. So, while small businesses may not be able to match Amazon’s pay, they can sweeten the pot for potential hires and their current employees in other ways.
Owners should say to prospective employees, “we may have a little difficulty giving you the full $15, but what else can we do for you,” says Brent Leary, co-founder of CRM Essentials, a consulting firm.
With fewer workers to juggle, small businesses can more easily offer flexible schedules, transportation or other perks that might make up for slightly lower pay. And companies that employ people in their 20s and 30s find that many of their staffers would prefer more benefits to extra pay.
Small businesses can also be better at giving younger people training and mentoring, even during a short-term hire.
“If you provide a work experience that they’re looking for, that makes it easier to find people,” Leary says.
RAISING PRICES MAY NOT SCARE CUSTOMERS AWAY
Some small business owners may have to pass along the higher costs of competing with Amazon or selling through its website to their customers. Many owners dread having to charge more but they should realize that consumers and businesses are likely to be more accepting of higher prices now that the economy is strong, Marks says.
Moreover, “if you have to increase your prices, your competition probably has to also,” Marks says.
Companies that have to raise prices should be up-front with customers about why it’s happening, Leary says. That will help preserve a good relationship with their customers.
Amazon stokes goodwill of its own by offering customers same-day or even one-hour delivery. Still, retailers have the ability to differentiate themselves, says John Lawson, an online marketing consultant.
“Amazon doesn’t necessarily have the most personalized service,” he says.
Lawson finds that more consumers are interested in ordering online and picking up merchandise in stores; any brick-and-mortar retailer that can offer that service should, he says.
AMAZON SELLERS EXPECT THEY’LL HELP FOOT THE BILL
GoVacuum.com, which sells on Amazon as well as its own website, believes the fees it pays the company for taking orders and packing and shipping merchandise will go up as a result of the higher wages. But GoVacuum.com Vice-President Justin Haver says the increase is a cost of doing business, and a change the Chantilly, Virginia, company will take in stride.
“The reality is, selling online and running a business requires forward thinking and nimble adaptation to current trends/opportunities,” Haver says.
Many owners may look for cost savings elsewhere in their company, perhaps finding cheaper supplies or lower shipping costs.
But Lawson, whose company sells vacuum cleaners and parts, notes that it costs money to sell merchandise, no matter what retail channel or what distribution and delivery system a business owner uses.
“After all these years, you just kind of get used to it. If it’s not Amazon, it’s the U.S. Postal Service,” says Lawson, who has been an online seller. “Every year it gets more and more expensive to stay in business and ultimately the consumer pays more.”