Amazon is coming down out of the cloud. For those of you who haven’t heard, Amazon is bringing a new distribution center to North Haven at the site of the old Pratt & Whitney plant. This is going to be an 855,000-square-foot fulfillment facility that is expected to add 1,800 jobs, according to Governor Dannel P. Malloy.
What impact will the new Amazon plant have on Connecticut small businesses? Will this boost or hinder the state’s economy? Will it mean better fulfillment and more opportunity for small businesses to compete, or will easier access to Amazon-delivered goods further erode profits for local retailers?
The state is betting that Amazon coming to Connecticut is going to do more good than harm. The state’s Department of Economic and Community Development is offering up to $15 million in Urban and Industry Sites Reinvestment tax credits if Amazon achieves set goals for job creation and capital investment. Amazon also may be eligible for an additional $5 million credit for equipment and construction materials.
Amazon’s Brick-and-Mortar Bait-and-Switch
While Connecticut lawmakers see Amazon as bringing more jobs to the state, there is an argument to be made that this is a Band-Aid to a larger problem—the stagnant growth of the Connecticut economy. Economists argue that the slowing economy is partly due to business consolidation—domination by behemoth businesses, which leaves little room for small-business growth. The new distribution center for Amazon could be viewed as another move toward Amazon’s march to market dominance.
In May, Amazon opened its seventh brick-and-mortar bookstore, on Columbus Circle in Manhattan. Some say it is “reminiscent of an airport bookshop” with a limited selection of books, although it looks big from the outside. Given the enormity of Amazon’s inventory, you would think it would have a larger selection. However, that’s the point. The bookstore is merely a physical reminder of all the goodies available to you from Amazon online.
As an article in Fortune reminds us, having brick-and-mortar stores is good for the Amazon brand. Offering a retail presence gives Amazon at least five benefits to drive sales:
- Content discovery – Amazon is a time-saver for those who know what they want, but it is not designed for browsers. Bookstores give customers a chance to discover new titles and authors, discoveries that translate into online sales.
- Content promotion – Amazon has become more than a distributor. The company is creating video content such as feature films and television series for Amazon Prime subscribers to binge-watch. The bookstore helps promote movies and music sales as well as books.
- Hardware demonstrations – Amazon bookstores also provide a showcase for new gadgets such as tablets and Kindles in an environment where they don’t have to compete with big-box brands.
- Amazon Prime – Similar to paid memberships with Barnes & Noble and other retailers, to avoid list price, you have to become an Amazon Prime member for $99 a year.
- The Amazon brand – Other retailers have boosted brand awareness and online sales by using retail outlets. It works for brands like Disney, Apple, and Microsoft, so why not Amazon?
Great for Amazon, Bad for Local Small Businesses
When you look closely, you understand that Amazon is not a friend to Connecticut small businesses.