Amazon is on the prowl

Amazon is changing everything.  And they are looking for a second place to do it.

They are revolutionizing retail.  You go on line and find what you want.  Click. It arrives on your doorstep in two days. It is easy and dirt cheap.  It is squeezing the margins out of brick and mortar retail.  

They are big and getting bigger.

Traveling around the country I encounter local newspapers exited about the potential that Amazon will move a second major center in their city.   It needs to be someplace already big because they project needing 50,000 new employees.  They know they are a big prize and this is a competition among cities.

This sends a message to cities and states that cities need to compete on things in addition to taxes.  The city needs to be a place people actually want to live.  It needs to be a place with significant institutions of higher education.  It needs to be a place with the capacity to place new housing units.  This was a stress test for cities, exposing their weaknesses.

Houston, you think you are great because your lack of zoning means people are free to build houses in flood plains?   Oops.

Portland, you think you are great because it is such a charming, livable city, but one where zoning is so tight there is no housing?  Oops.

Click Here: Quartz

Tennessee, Arkansas, Georgia, Alabama, Mississippi, is their any question that the reputations of your states on race relations matters?  Oops.

Amazon wants a good deal, but it cannot just be cheap.  It has to be great.  Amazon laid out its specific needs in an RFP:  A big building site, stable state financial situation, tax incentives, a strong local university system to supply its labor force, good transportation logistics, ability to build promptly, culture fit for an educated multiracial work force, quality of life and attractiveness of the city to employees.

An easy element to ignore is the one that may be the most important, hidden in the middle of the list. Infrastructure. Trucking costs.  Amazon is not just a technology company.  It is a logistics company.  They are moving stuff from supplier to you.

Should major distribution centers be near the HQ?  Distribution is an integral part of the Amazon system.  It makes sense for Amazon to link them.   That is the premise of the guest post below, placing Amazon's second HQ in the middle of the southern New England center of higher education, population center, and multi-modal transportation mix.

Here on the west coast we experience a version of what the Peter Coster reports in this Guest Post. Goods from around the world arrive at the port of Long Beach.  It gets put onto trains and trucks and is sent around the country.  It creates an imbalance.  More stuff goes out of that port than is sent back to that port, so trucks going back to Southern California sometimes need to go back empty.  Trucks going to Long Beach are in demand, so shipping that direction is cheap. The imbalance creates an opportunity.

Guest Post by Peter Coster

"A Truckers Perspective on the Amazon Decision."

Peter Coster

"Amazon wants to build another distribution center somewhere in the country.  They are looking for bids, even from Canada.  Cities are falling all over themselves trying to secure that site.  Low tax rates and other accommodations are being offered.  "Please take me!"  Today is the last day for bids to be submitted, with the results to be announced some time next year.

So, if you're Amazon, where should you go?  What's most important?  Taxes, maybe.  But, transportation should top the list.  I was in the trucking business for over 20 years.  Initially, I was based in Boston, then managed an office in Richmond, VA.  My company, C.H.Robinson Worldwide, was the leader in transportation logistics.  That is, we transported truckloads of goods throughout the country without owning a single truck.  We did this by filling trucks who would otherwise go home empty.  We provided a valuable service to the carriers and also saved manufacturers money.

A quarter of the population in this country live in the Northeast.  New England, NY, NJ, and PA.  So, lots of goods are trucked in.  However, that area does not produce very much by comparison.  So, there is a transportation imbalance.  Lots of trucks going in full, lots of trucks going home empty.  Providing fuel, food, and driver's pay is expensive, especially if you get nothing in return.  The biggest manufacturing area in the country is the Midwest, the so called Rust Belt.  The bulk of their products are shipped east where the people are.  The biggest produce producing areas are California, Texas, and Florida.  Lots of refrigerated trucks are based there, all supplying the Northeast.

Because of this tremendous imbalance in trucking, the freight rates going in and coming out are very different. A carrier might charge $2.00 per mile to haul a truckload of goods to the Northeast, but gladly take only $1.00/mile to get home where the good paying freight is.  So, with that in mind, if you're Amazon, where in this country would be the perfect spot to base your new distribution center?  If I was Amazon, I'd take a hard look at Bridgeport, CT.  All those trucks going into New England mostly leave via I95 going right through Bridgeport.  There are a ton of empty trucks within a 4 hour radius.  Plus, they'd be close to the NY airports for air freight and near the ship terminals for overseas goods coming in.  I have no idea what Amazon will do and have no interest on behalf of anyone.  I'm just looking at it from the best transportation point of view, based on my experience.  I wonder what they eventually do."

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Coming tomorrow:   Analysis of the startling development within the GOP.  George Bush delivers a defense of the GOP philosophy voters had supported for the decades pre-Trump.  It was open-armed, international, respectful, and it promoted order and unity, not division.   Tomorrow we talk about the fallout.