Why Urbanists Need to Talk about Amazon
The following article is Kea Wilson's perspective on an ongoing conversation we'll be having this week about Amazon and what its place is within a strong town:
- Later today, there will be a counterpoint to this piece written by Chuck Marohn.
- On Thursday, April 27, we'll release a podcast in which Chuck Marohn and Kea Wilson debate the merits of and problems with Amazon.
- On Friday, April 28, at 11:30am CT, we'll host a live conversation on our Slack discussion forum to consider Chuck's and Kea's arguments and hear your perspectives on this issue. Everyone is welcome to participate. Join our Slack here, then visit the #_scheduled-slack-chat channel at 11am CT on Friday to chat.
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Here’s a bet I’d be willing to stake some money on: if you care the least bit about urban economics and the future of American cities, you’ve probably spent your fair share of time talking about the perils of big box retail.
They’re ugly and huge, which we know kills street life. They generate way less tax value per acre than their small-box brethren, often from the moment they break ground with the assistance of city TIF dollars. They require insane amounts of parking, which makes towns even less money than the not-exactly-productive square footage past the building’s front doors. And when they fail, they leave behind behemoth buildings that communities struggle to repurpose—not to mention the miles of short-sighted, auto-centric road development that these stores demand to ship their goods, and the cascade of negative impacts on our cities’ bottom lines and our citizens’ health, welfare, safety, and sense of community that follow. (See: literally everything published by Strong Towns.)
Suffice it to say, a strong town is probably not going to have a whole lot of Home Depots or Macy’s.
We want businesses that keep money in our communities, not siphon it off to the conglomerate mothership. We want development that generates wealth for our towns, not humongous concrete bunkers and acres of asphalt that supply our tax rolls with next to no revenue before they inevitably and spectacularly fail. We want life in the communities we love, and we want it to last: people out in the streets, the buzz of commerce in the air, the sense of things changing and growing and being built all around us, on a foundation that we know can endure...
So why on earth aren’t we talking about Amazon?
Many of the urbanists I know and admire simply have never questioned Amazon.* And why would they? Amazon has become, in many minds, synonymous with online shopping the way that “Googling” has become shorthand for using a search engine. Amazon offers cheap prices, lightning-fast delivery, and the ability to buy everything you need in one easy place. And maybe best of all, you never have to get in a car or step foot into a big box store to do it. As almost every major newspaper has breathlessly reported by now, Amazon is even being held up as the likely suspect behind the closure of big box stores across the country. It’s even being speculated that we’re at the brink of a sea change in American retail that will see the big box model turned into a thing of the past, with Amazon as the likely vanquisher. What’s not to like about that?
I don’t blame anyone for not having a ready answer to that question. After all, Amazon has made it their business model to make you think that way: they market themselves as your friendly, invisible big box store, with all of the benefits and none of the massive, concrete drawbacks of the K-Marts of the world that you’ve (rightly) come to distrust. All you see is the website, algorithmically manipulated to show you everything you want and need—and two days later, a little brown box on your doorstep with a smile printed on the side.
Here are a few reasons why you should be just as skeptical of that little brown box as you are of that giant concrete one down the road:
An Amazon fulfillment center and accompanying parking lot. Source: Lvi56
1. AMAZON AND PROPERTY TAXES
To take the lowest-hanging fruit first: if you think your local Costco isn’t paying enough to your city’s property tax funds, think about how little Amazon is ponying up.
If you live in a state like mine (or the 20 others like it) where Amazon owns no properties, that number is exactly $0. If you live in a state that does have its very own shiny-and-new Amazon warehouse, the answer still might not make you happy.
Just as with big box retail, local governments race one another to the bottom to woo Amazon fulfillment centers (and the jobs that come with them) into their districts with the promise of tax increment financing. According to a report from the Institute for Local Self Reliance (ILSR), Amazon “has pocketed at least $613 million in public subsidies for its fulfillment facilities since 2005...and more than half of the 77 large facilities it built between 2005 and 2014 have been subsidized by taxpayers.”
And remember: the building they’ll put up will look a lot like that Sam’s Club you hate, but even bigger. That invisible big box is only so invisible.
An Amazon warehouse. (Source: Scott Lewis)
2. AMAZON AND SALES TAXES
And even if your city wins the right to gouge their property tax coffers for the privilege of building a gigantic, hideous warehouse there, don’t think that means you’ll all be rolling in sales tax money when the final shingle is on the roof.
In the early days, Amazon famously made much of its empire by taking advantage of a tax loophole that doesn’t require consumers to pay sales tax on consumer goods shipped across state lines. While 30 states have since closed that loophole (including mine, albeit only three damn months ago), the average 10% pricing advantage over traditional retailers was enough to stifle market competition and price competitors out of business by the time the laws caught up (along with some serious loss leading that treads the line of predatory pricing, plus some very helpful bizaarro world Wall Street economics—more on that later).
And of course, sales-tax dependent cities are the ones who paid the price: the National Conference of State Legislatures estimates that states lost out on $23.3 billion in revenue in 2012 alone because of purchases made online. Amazon controls 43% of all online retail; I’ll let you speculate on the math there.
Source: ISLR report
3. AMAZON AND JOBS
So when Amazon builds in a city, they pay no or relatively low property taxes, often while failing to generate any sales taxes or otherwise enriching the communities in which they’re based. They must be creating tons of jobs then, right?
A line from Strong Towns' principles says it best: “Job creation and economic growth are the results of a healthy local economy, not substitutes for one.” Amazon is a textbook example of why.
According to the ILSR report, “Amazon has eliminated about 149,000 more jobs in retail than it has created in its warehouses, and the pace of layoffs is accelerating as Amazon grows.” Put another way: If you want to experience a net loss of hundreds or even thousands of jobs in your town while giving a politician a fun ribbon cutting ceremony to attend where they can crow about “growth,” an Amazon fulfillment center is exactly what you should build. (For the low, low price of a hefty hunk of your city’s property taxes—which, as you know from reading Strong Towns, don’t even generate enough wealth to keep many cities’ basic infrastructure intact. But hey, future mayors can worry about that!)
But of course, that’s not all you’ll pay for those warehouse jobs.
4. AMAZON AND MAIN STREET BUSINESSES
Remember when I said earlier how everyone’s so excited about Amazon crushing its big box competition? They’re not the only ones getting crushed. ILSR again:
Our analysis estimates that in 2015, Amazon’s growing market share caused more than 135 million square feet of retail space to become vacant. For perspective, that’s the equivalent of 1,267 vacant Home Depot stores, or about 700 empty big-box stores plus 22,000 shuttered Main Street businesses. As Amazon’s sales expand, these vacancies will mount.
Photo by Johnny Sanphillippo
I haven’t yet found a good study that outlines exactly how much of that vacant retail square footage belonged to small businesses rather than, say, Staples. (Let me know in the comments if you have.) But my years as an independent bookseller have shown me first hand that the number is far from zero, and that some of the businesses hardest hit by Amazon’s impact were exactly the kind of vital, third-place shops in walkable, mixed-use neighborhoods that we often talk about when we describe the likely elements of a strong town.
When you think of an extraordinary main street, can you picture it without the kind of small-scale retail that brings people out into the public square and gets eyes on the street, Jane Jacobs-style? When you think of a shopper, do you picture someone shut up in his home on a computer, with the street outside empty but for the odd delivery truck (or I guess, maybe someday, drones with brown packages)? Do you really picture the only stores on your main street looking like this, designed transparently to train you on how to be a better online shopper and get you home to buy, buy, buy?
5. AMAZON AND ANTIFRAGILITY
But the most important reason urbanists should question Amazon is also the slipperiest: because the more Amazon’s business model succeeds among consumers, the less antifragile our towns might become.
Because I’m writing this for Strong Towns, I’ve focused my argument here on land use, tax productivity, and how shoppers participate (or don’t participate) in our built environment. And sure, most of these arguments could be applied to many online retailers, if only they got big enough and competitive enough to pull some real weight in the global market. Don’t get me wrong: I am not anti-online shopping. Nor am I against companies growing and succeeding within a competitive global market.
But is Amazon really competitive in the way classical economists use the term? Practically since it began, Amazon has been thoroughly propped up, not just by TIF dollars to build its warehouse spaces, but by Wall Street investors who were more than happy to own stock in a company that operated at a loss for (by some estimates) its first 20 years. In a sane world, operating that far into the red for even a fraction of that time would be a death sentence; Amazon would fail, and the wheels of capitalism would continue to turn.
But in the world of eleventh-dimensional chess occupied by modern Wall Street investors, Amazon’s future potential to own most of the entire retail sector, and quite possibly the entire economy, is worth the wait. After all, Amazon’s CEO, Jeff Bezos, built a clock in his backyard that is designed to last 10,000 years, like some sort of Batman villain. He’s got nothing but time.
“The more I learn about it, the more it seems the only way for Amazon to win is for them to take the whole pie. They need to sell everything, to everyone, at every stage of production and consumption.”
The more I learn about it, the more it seems the only way for Amazon to win is for them to take the whole pie. They need to sell everything, to everyone, at every stage of production and consumption. If you write a book, they need to control the publishing house that prints it and the self-publishing platform that you’ll go to if the book is rejected by that publishing house and the site where your readers write their reviews and the store that sells it all (and that any of their competitors use to supplement their own sales) before they make so much as a dime.
Multiply that business model across untold industries--cloud computing, groceries, even oscar-nominated movies--and give it enough time, and you have a massive centralization of power that has no precedent, and more to the point, is all but immune to current anti-trust law because it is diffuse across so broad a space (and offers low prices to consumers--at least for now).
One of the items on the Strong Towns strength test that’s particularly meaningful to me is this: “If your largest employer left town, are you confident the city would survive?” When you globalize that idea a bit, it says something even more vital: that if we want our communities to be strong, we have to think very carefully about the unseen structures upon which we rely, and what we’d do if they failed.
Does your town rely on the people that live there, and the diverse things they build? Have you thought about the value of brick and mortar and foot traffic and what it takes to activate the complex street ballet of many people moving through conscientiously built space? If one business fails, will the city survive? If one business succeeds, will that whole dance company withdraw to the wings?
Amazon wants to be your town’s one and only. They might even need to be in order to succeed. Is all that worth what’s in the little brown box?
Want to discuss and debate this topic further? Read Chuck Marohn's counterpoint article, then Join Kea and Chuck for an open Slack discussion this Friday, April 28, at 11:30am CT.
*Full disclosure: I started speaking up against Amazon because I’m a writer and, previously, a bookseller, and I’m horrified by what the company has done (and continues to do) to the book industry. But I’ve continued to question their business practices because I care about cities, and more particularly, about the future of our economy and built environment—and the longer I’ve asked those questions, the more complex and disturbing that conversation’s become.
(Top photo by Álvaro Ibáñez)