The robots are moving into Amazon.com, Inc. (NASDAQ:AMZN)’s warehouses this holiday season, promising a world of cost saving benefits while costing $46 million to install in just one warehouse.
Can Amazon turn a significant profit on its business?
The leading online retailer, which has yet to prove to investors it can turn a significant profit on its business, has proven it is good at spending money and making promises of future profits. Amazon has installed 15,000 robots in 10 U.S. warehouses and made promises of a positive return on investment in several fronts, Reuters is reporting. The company claims the robots, which supplement human workers that typically make just above minimum wage, will be responsible for moving packages around a plant. Amazon says it will reduce operating expenses by one-fifth and speed deliver time of packages. Amazon claims they can cut the processing time to 13 minutes from 90 minutes.
The robots being installed at Amazon.com, Inc. (NASDAQ:AMZN)’ facilities in five states – California, Texas, Florida, New Jersey and Washington – and come as a delivery snafu snarled package delivery last Christmas season. Many Amazon customers placing last minute orders didn’t receive their holiday presents until after the holiday.
The robots are also designed to further impale the holiday season success of brick and mortar retailers who, unlike Amazon, are forced to pay sales tax on items they sell. The death of the shopping mall or main street storefront in favor of online offerings has been well documented. Starbucks Corporation (NASDAQ:SBUX) in particular has been vocal about the impact of declining shopping mall traffic on its financial results. A key component of further diminishing brick and mortar retailers hold on holiday sales, which is where most Americans continue to do their shopping, is the consistency and speed of the online delivery experience. Amazon thinks the robots are a part of that solution.
Amazon’s robot replacing low-wage warehouse workers but at what cost?
While the robots are, for the most part, supplementing relatively low-wage warehouse workers, they come at a cost. The orange 320-pound warehouse workers cost nearly $30,000 each, based on published estimates of the all in cost to outfit a warehouse. However, the ongoing operational expense is unknown. The robots roll around the manufacturing floor on wheels, controlled by an algorithmic management system and human supervision, bringing appropriate product to a main packaging area where humans pack boxes and still process packages.
The move has several benefits for Amazon.com, Inc. (NASDAQ:AMZN)’. While the company claims it will improve service and reduce cost, it also provides a boost for Kiva Systems, a robotics company Amazon purchased for $775 million in 2012. Amazon’s warehouse adoption of the robots allows the company to provide an example of Kiva Systems benefits in an environment the company totally controls.