Amazon Is Everywhere

The depth of Amazon’s penetration of American popular culture is pretty amazing.  Last week, for example, we needed some white cranberry juice to prepare a seasonal cocktail we were making for a gathering with friends.  Kish went to several grocery stores in Columbus and couldn’t find any.  We decided to give Amazon a try, and sure enough, it offered Ocean Spray white cranberry juice — which was delivered to our doorstep the next day, with no muss and no fuss.  Pretty convenient!

But I had no idea of the stunning breadth of Amazon’s business activities until I got a surprise while walking the dog.

In our neighborhood, there are a few strategically placed containers where dog owners can get free poop bags.  It’s a good idea for the neighborhood, because it gives dog owners no excuse but to clean up after their pooches, and it’s a blessing for the dog owners who otherwise might be caught short in the crucial bag department.  The bags had been made by anonymous companies and featured cartoon drawings of happy (and apparently relieved) dogs — until now.  I stopped by one of the containers last week, pulled out two of the plastic baggies so I would have a ready supply, and saw to my surprise as I was putting them into my back pocket that they were from AmazonBasics and featured the familiar swish/smile logo.  So, Amazon has now made crucial inroads into the German Village canine poop bag market.

It’s hard to imagine that poop bags are a very lucrative, high-margin item for a supplier, but I guess if you’re aiming to dominate the supply of every product Americans might need, poop bags are just another item on the list.  And the poop bag itself makes it clear that Amazon isn’t just looking at America, either — the bags I took feature the suffocation hazard warning in English, French, German, Italian, Spanish, Chinese, and Japanese.

Achtung!  Amazon is everywhere!

 

Voting With Its Wallet

Seattle is home to some of the largest corporations in the world, with one — Amazon — growing like crazy and fueling a boom in downtown construction.  But when Seattle politicians decided to impose a tax on large employers in the city to deal with a homelessness crisis, Amazon very publicly decided to pause work on a new downtown office building until after Seattle City Council votes on the tax.

03062018_amazongrowing_132746-780x513The proposed tax would have a real impact on businesses.  It would be a “head tax” of $500 per employee on approximately 500 businesses that gross at least $20 million annually in Seattle.  For Amazon, which currently has about 45,000 workers in Seattle, the tax would cost more than $20 million in 2018 and 2020, with that tab increasing when the form of the proposed tax would shift to a .7 percent payroll tax in 2021.  Even for a company that is highly profitable — Amazon recently reported quarterly income of $1.6 billion — $20 million a year isn’t chump change.

Amazon typically doesn’t mess with local politics in Seattle, so its pause in construction planning until after the City Council vote has had a real impact.   One City Council supporter of the tax accused Amazon of attempting “blackmail,” but other voices in city hall and in the real estate development community shuddered at the thought that the company might stop its investment in Seattle.  The concern is only heightened by Amazon’s announced search for a new city in which to build a second headquarters — a process that is already underway, in which Columbus and other cities have made the first cut.  Some people are concerned that Amazon might just direct its growth exclusively to the new home of “HQ2,” leaving Seattle in the dust.

Why should large employers, alone, pay a tax to address Seattle’s growing homelessness problem?  Supporters of the tax say that the large tech companies have contributed to the problem by bringing in highly paid workers who have caused a spike in home prices and rents — the median price for a house in Seattle is a whopping $820,000 — and that has contributed to the homelessness problem.  The sponsors of the tax also note that Seattle doesn’t have an income tax or tax capital gains, and claim that the city has few options to raise funds to address homelessness.  It’s curious, though, that the tax would be limited to only  large employers, as opposed to all employers, or that it doesn’t target various forms of real property transfers.  After all, a lot of people have presumably made a lot of money selling property that dramatically increased in value due to Amazon’s growth — why shouldn’t they contribute some of that profit to address the homelessness problem?

The reaction of the City Council member who characterized Amazon’s decision to pause construction as extortionate reminds me of the hubris that caused cities like Detroit to assume (wrongly) that large employers wouldn’t move away — or the story of the goose that laid the golden eggs.  As Amazon’s experience in its “HQ2” search proves, other cities would welcome a large employer that offers thousands of workers high-paying jobs.  The reality is that Seattle needs Amazon more than Amazon needs Seattle.  Does it really want to risk killing the goose?

Columbus (Surprisingly?) Makes The First Cut

I’ve written before about Amazon’s announcement to build a second headquarters facility somewhere in North America, and the efforts of cities like Columbus and San Antonio to attract the river of Amazon cash that would flow with the building of the giant company’s second HQ.  In all, Amazon received 238 proposals from cities throughout the United States, Canada, and Mexico that wanted to be considered in the selection process.

downtown-columbusYesterday, Amazon announced the list of the locations that will be 20 finalists, and lo and behold, Columbus made the list.  San Antonio, alas, did not.

According to the New York Times, the selection of Columbus (as well as Nashville) to be among the 20 finalists was a “surprise.”  The Times contrasted the Columbus “surprise” with cities that were “widely expected to make the cut,” like Boston, Denver, and Dallas, “hip centers like Miami and Austin, Tex.,” and Los Angeles and New York, as “centers of the tech industry.”  Some people in Columbus were irked by the “surprise” reactions, which seem to have a lot more to do with our city’s historic “cowtown” image rather than the reality of the modern Columbus.  One Columbus publication, 614, chastised the Times for reflecting “regional snobbery” to “take a big poo on our small victory.

According to the Times article:  “The process will now shift into a new phase, with Amazon representatives communicating more directly with the finalist cities as they prepare to select a winner later this year — and perhaps with cities being even more outspoken about why they should be chosen. Emissaries from Amazon are expected to visit the finalist locations in person.”

It will be nice to have the Amazon emissaries come to Columbus to see for themselves what our fair city has to offer and hear about why it would be an excellent choice for “HQ2,” with its anticipated $5 billion in investments and 50,000 high-paying jobs.  Who knows?  Maybe they’ll experience “surprise” when they stop by — or maybe they already know that Columbus is a great place, and that’s why we made the list of finalists in the first place.

Amazon Primed

Amazon — that massive, gushing river of deliveries that has fundamentally and forever changed the modern retail business — has announced that it is looking to build a second corporate headquarters somewhere in North America.  Cities like Columbus are jockeying for position and hoping that they get picked to host the Amazonians.

amazonLanding Amazon and its “HQ2” has got to be tempting for just about any city.  You can look at what Amazon has done for Seattle, where its corporate headquarters is located, and see what having Amazon might mean.  Amazon employs 40,000 people on its Seattle campus, it uses an enormous chunk of the available Seattle commercial real estate, and it calculates that, since 2010, it has contributed $38 billion to the Seattle economy.  The proposed “HQ2” is being presented as a similarly enticing proposition for job-hungry municipalities.  It is supposed to create as many as 50,000 jobs paying an average of $100,000, and also produce $5 billion in capital investment in the first 15 years.

As Seattle’s experience demonstrates, these don’t appear to be pie in the sky numbers.  Instead, Amazon has a proven track record of doing what every city wants from a leading corporate citizen — it creates good jobs that are filled by people who pay their taxes and it injects money into the area, which in turn creates jobs at the companies that provide the services that Amazon and its employees need.  Sure, there might be some drawbacks — Seattle real estate has become pretty expensive — but most cities would gladly accept that problem in order to tap into the Amazon river of tax revenue.

Amazon has released a list of detailed criteria that will be applied in its search for the right location for HQ2.  It’s looking for a metropolitan area of at least 1 million people, close to an international airport, with good roads, schools, and mass transit.  Oh, and it also needs up to 8 million square feet of office space.  And the modern world being what it is, we can expect Amazon to look for competing cities to produce packages of tax incentives, tax deferrals, and available development funds designed to entice Amazon as it makes its choice.

Columbus, where several Amazon data and distribution centers have located in recent years, is expected to compete for the prize, and Richard has written about San Antonio’s hope that it wins the crown.   We can expect the big boys, like Chicago and Dallas, to put in significant bids, and struggling cities like Detroit would no doubt see the Amazon initiative as a chance to really turn things around.  And don’t forget that Canada is part of North America; Toronto is said to be interested, too.  In all, about 50 metropolitan areas meet the 1 million population cut-off and would be in a position to compete for the prize.  Bids are due by October 19.

Hey, Amazon!  Come to Columbus!  You’d like it here!

The (Sigh) News About The News

The news business in America has been in the news a lot recently, and unfortunately the news is pretty much all bad.

Two of our most storied newspapers, the Washington Post and the Boston Globe, have been sold for a small fraction of their value only a decade ago.  The New York Times, which bought the Globe in 1993 for $1.1 billion, sold it to billionaire John Henry for only $70 million.  What’s worse, the Times retained liability for the Globe’s pension obligations, which reportedly total more than $100 million.  If you do the math, that means the Times basically lost its entire $1.1 billion investment over 20 years.  Although the Times tried to justify its sale as an effort to focus on its core “brand,” it’s obvious the sale sought to unload a money pit that the Times didn’t know how to turn around.

The Washington Post and related publishing businesses were sold to Jeff Bezos, the founder of Amazon, for $250 million.  Although the price was higher than the pittance paid for the Globe, it still shocked the journalism world because it was much lower than the Post‘s expected value and because it ended the long-time ownership of the Graham family.  Both the Post and the Globe have been troubled by the same trends that have plagued other newspapers — declining circulation and a business model based on paper, with all of its attendant costs, when the rest of the world is moving full throttle into digital communications.

In addition to the fire sale prices paid for these two legendary publications, recent journalism news has seen continuing layoffs of reporters, editors, and other members of newspaper staffs.  Last week, for example, the Cleveland Plain Dealer laid off about one-third of its editorial staff.

One sign of the desperate times in the news business is the effort to see the silver lining in Bezos’ purchase of the Washington Post.  Some people in the journalism industry hope that Bezos, who has taken Amazon from an on-line bookseller to its current status as an ever-expanding conglomerate powerhouse, may be able to figure out what has stumped others in the journalism business:  how to make the daily newspaper something that everybody will read, and happily pay for, again.