Why is Walmart Closing its E-Commerce Fulfillment Centers?
Walmart, one of the largest retail corporations globally, has been making significant moves in the e-commerce industry to compete with its rival, Amazon. In recent years, Walmart has opened numerous e-commerce fulfillment centers to boost its online sales. The company has announced plans to close five fulfillment centers, including the Chino San Bernardino fulfillment center. This decision has surprised many, and there are several reasons behind Walmart’s shutting down these centers.
About 200 workers at Pedricktown, New Jersey, and hundreds of others at Fort Worth, Texas; Chino, California; Davenport, Florida; and Bethlehem, Pennsylvania were let go due to a reduction or elimination in evening and weekend shifts, the spokesperson said.Reuters
Changing Customer Expectations
According to a statement by Walmart, “customer expectations are changing, and we are moving quickly to meet and exceed their needs.” Walmart’s decision to close its fulfillment centers could be due to a shift in customer behavior. The COVID-19 pandemic significantly impacted the e-commerce industry, with consumers shifting their purchases online to avoid physical stores. However, as the world recovers from the pandemic, many customers return to shopping in physical stores. This trend could mean that Walmart’s e-commerce sales have slowed, causing the company to downsize its fulfillment centers to reduce costs.
Lower Sales Growth and Profits
Walmart’s decision to downsize its e-commerce fulfillment centers could also be due to its lower projected sales growth and profits. The company expects same-store sales for the U.S. business to grow between 2% and 2.5%, compared with 6.6% in the previous fiscal year.
Additionally, the company’s earnings per share are expected to range between $5.90 to $6.05 for the coming fiscal year, which is lower than the previous fiscal year’s earnings of $6.29. The declining e-commerce market sales may have also influenced Walmart’s decision to close its fulfillment centers.
Walmart has been investing in automation to reduce the number of steps employees take to process e-commerce orders. The company has been working with companies like Knapp to help automate its fulfillment centers, reducing the number of steps from twelve to five in Pedricktown, New Jersey. Walmart’s CEO, Doug McMillon, has stated that the company is excited about its automation opportunities and plans to increase its automation investment as part of its $15-billion capital expenditure budget. This investment could mean that Walmart is moving towards a more automated fulfillment process, reducing the need for large e-commerce fulfillment centers.
Worker Adjustment and Retraining Notification (WARN)
Apart from Pedricktown, New Jersey, Walmart did not post a Worker Adjustment and Retraining Notification (WARN) notice for the layoffs, reports Reuters.
Walmart’s decision to close down its e-commerce fulfillment centers has also raised concerns about its adherence to the Worker Adjustment and Retraining Notification (WARN) Act.
According to U.S. labor law, companies with 100 or more employees must provide 60 days advance notice for mass layoffs and closings. Walmart did not issue a WARN statement, claiming that the warehouses still usually operate and did not know the number of workers they would lay off. However, the closure of five fulfillment centers and the potential loss of jobs for hundreds of workers could significantly impact the U.S. economy.
The spokesperson for Walmart, however, declined to call them as mass layoffs and claimed that the warehouses are still operating normally. The company did not issue a WARN statement because it was not sure about the number of workers it will lay off, eventually.