Guest Post: Straight Talk on Amazon and Communities

Elizabeth Bluemle - August 19, 2015

Today’s guest post, by Eight Cousins Bookstore founder and longtime bookselling lioness Carol Chittenden, is not to be missed if you want a rational, fact-filled, beautifully articulated article about the effect Amazon is having—beyond local bookstores—on entire communities.
In July, Carol was invited to address a community group at the Woods Hole (Mass.) Library’s annual meeting. The following is her talk, very lightly edited for length and to omit some specifically local content.
I was a bookseller in Falmouth through some challenging years. The reason Falmouth still has a bookstore, unlike many other towns, is because of loyal customers. There were six bookstores in town when Eight Cousins opened in 1986. The reason Eight Cousins is now the only one left is Amazon. Ursula K. LeGuin and others have spoken eloquently about the censorship issues connected with concentration in the publishing industry. Today I’d like to talk a bit about the impact of Amazon not on bookstores, but on communities.

Your presence here indicates that you like being part of this community: you enjoy good schools, a relatively well-run town, active civic associations, fire protection, world-renowned scientific institutions, a state government no more or less corrupt than most, and a library that connects to a vital, up-to-date regional network. You like a good parade, a community theater, a handy post office. You know the secret places to park! Chances are you support organizations like the radio station, this library, the scouts, etc. with your taxes, your donations, and your participation. When things don’t go the way you think they should, you like having some say in fixing the problems.
According to the Institute for Local Self Reliance, “case studies have found that about $45 of every $100 you spend at locally owned stores stays in your community…” The best figures I can find about what stays in the community when you spend $100 at Amazon ranges from “pennies” to “almost zero”. Let’s take a look at how that $45 difference affects five parts of this community: jobs, rents, taxes, shopping experience, and donations to community organizations.
First of all, jobs. The buzz about “job creation” goes on endlessly. Who among us doesn’t know someone who’s looking and hoping? The need never ends. Consequently, Amazon touts each warehouse opening as “creating jobs.” There’s an office in Cambridge. A warehouse opened in Stoughton in 2014. Another one is about to break ground in Fall River. Good news, right? But according to ILSR, for every $10,000,000 spent at independent businesses, 47 jobs are generated. That compares to 14 for the same amount spent at Amazon. 47 to 14: what’s wrong with that picture? Ask your friend or relative who’s praying for an interview.
After jobs come rents. Since a great deal of our community functions are paid for with property taxes, commercial rents are a huge part of the town’s revenue base. Rent, that is to say income, from commercial property, depends upon the income that property can generate. When rents go up, valuation goes up, and tax revenues go up. When businesses fold, and storefronts and offices stand empty, of course the reverse is true. Real estate investors back off, property values slide, revenues drop, and the community has to choose between cutting services and increasing tax rates. The School Committee will be happy to discuss the details with you.
Jobs and rent lead directly to the third point, Amazon’s impact on taxes overall. I’m guessing that most people here are in the 25% income tax category. The latest information I could find is that pays 3.5% to 6% in federal taxes, and presumably about the same for the state, so you’re paying a chunk of Amazon’s instead. Since 2012, Amazon has had to collect sales tax here [in Massachusetts]. However, there are still 22 states where it doesn’t, states that are cutting services left and right even as Amazon fights tooth and nail to keep it that way.
In Stoughton, a Boston suburb, the promise of 125 new Amazon jobs was enough to attract a 10-year, $2.9 million personal property tax exemption. Amazon leans hard on states and localities for tax breaks, and it would just as soon you look the other way. Selectman Bob O’Reagan announced it, saying, “It’s been in negotiations for many months,” but also explained that the project had been under a non-disclosure agreement until the day before the selectmen voted to approve it.  The state Dept. of Economic Development also approved $600,000 in tax credits.  For an equal volume of sales, local businesses would have generated almost 300 jobs at no cost in tax credits or state agency salaries.
As for Fall River, the Providence Journal reported this past March: Amazon on Tuesday won $3.25 million in tax breaks in Massachusetts from the state’s Economic Assistance Coordinating Council. […] In return, Amazon agreed to create 500 permanent jobs at an average wage of $35,000 and keep them for at least five years. […] The $3.25 million in state tax breaks includes a $1-million job creation credit, which the company is allowed to sell for cash
Using the same formula on job creation, local Fall River businesses would generate over 1100 more jobs than Amazon on the same anticipated sales volume.
But as the courteous civil servant at the Assessor’s Office said the other day when I was asking about mechanics of local property taxes, “Oh, I use Amazon Prime all the time. It’s so easy, and I don’t have to pay shipping costs.” Well, she’s only paying what, — $99 per year? — shipping costs. Whereas shopping online or in person on Main Street and picking things up locally, customer shipping cost is $0. She went on to touch on other aspects of the shopping experience: convenience, price, selection, and personal interactions.
The convenience of 24/7 shopping is a big attraction. That’s why about 80% of our town’s Main Street retailers have websites where you can shop online. I won’t even ask for a show of hands for how many people here have ever ordered online from one of them. Again and again and again I have mentioned to local customers that they could place their orders with Eight Cousins at, only to meet an astonished look and a blurted admission, “Oh! You have a website?”
As for prices, I did some spot checking between Amazon and local retailers. It was a wash. Yes, Amazon offers whopping discounts (extracted from their suppliers) on certain high profile items. For the rest, prices are generally equal or higher. [Elizabeth adds, Yes, this is so true! Often, we will comparison-shop items for sale in our store and discover that Amazon charges more. But the erroneous perception–fueled by marketing and early discounting that was weaned away once market share was won—is that Amazon is always less expensive.] Amazon will blackball any business that doesn’t meet its discounting demands. Furthermore, any Amazon affiliate such as a used book dealer or small appliance manufacturer will find itself liable to “investigation” and blackout right about the time it begins to compete, especially around the holiday season.
And do you know what “showrooming” is? It’s the practice, actually encouraged by Amazon, of a customer looking over the merchandise in a real store, checking its price, and then ordering online. Not only is Amazon paying no rent on that display space, it’s actually exploiting it. That, my friends, is viewed among retailers as theft of service.
While it’s true there are more different products offered on websites than in stores, those are all virtual products. The real ones all come from the same manufacturers and warehouses as the ones you find in stores. So Ace Hardware can order that fancy weed whacker just as easily as website X. Of course there are always unusual items that have unusual supply chains, and therefore are more difficult for local shops to order. Fine, go to the wider pool of the web. That’s its area of excellence. On the other hand, do you really want to spend the time to sort through six hundred different refrigerator models? Or will you simply let a digital algorithm (weighted by promotional money) decide for you?
Personal interaction
One of the pleasures of small town living is the casual encounters with a friends. At a time when digital devices push solitude on toward isolation, shopping experiences are mingling experiences. Some people go to bars and cocktail parties for that. In this community, it’s easier. Just go shopping.
Local businesses respond more or less weekly to charitable requests, and for the most part they donate those gift cards and merchandise willingly within their means. They lend their payroll hours to help out with parades, displays, programs and projects. They watch over the child waiting anxiously for a ride, and they offer an antsy little kid the succor of a restroom or a tissue. They put out bowls of water for dogs, tidy up their flower beds, and volunteer for town committees. They do so much that even Amazon has noticed.
Amazon’s response has been utterly cynical: they have set up a program called “Amazon Smile,” which offers to donate a portion of your purchase price to the charity of your choice when you click on Amazon Smile before placing your order. Evidently they downloaded from each state’s website the name and contact information of every registered non-profit and made this offer to each of them. Many took them up on it, and promote the program in glowing terms. But read the fine print: it applies only to “eligible” purchases. Guess who defines eligibility. And the donation is one half of one percent. To donate $100.00, you would need to spend $20,000 on “eligible” purchases. If you spend $20,000 locally, not only does it generate money and participation toward worthwhile organizations, it also adds at least $9,000 to the local economy in wages, rents, and taxes.
We all know that some business somewhere in this town is cutting some corners somewhere. But on the whole, a local business can’t get away with much, because there are too many eyes on the operation: staff, customers, accountants, bankers, newspapers, and Town Hall.
Amazon is notoriously opaque, but if you skim through The Everything Book: Jeff Bezos and the Age of Amazon by Brad Stone (2013), you will soon see Bezos’ pattern of pressing absolutely every angle – legal interpretation and lawsuits, labor regulations, taxation, leaning on politicians, misleading language, gathering intelligence about competitors, stock market regulations, pressuring competitors, shipping contracts, abrogating pricing agreements with suppliers, leveraging capital, harvesting and selling marketing data, and more — to its absolute limit in the name of his “Get Big Fast” strategy, with the goal of dominating world retailing. Secrecy is the angle that protects all the rest.
“Get Big Fast” meant grabbing market share by hook or by crook. As a customer, Amazon became powerful bait first of all to the publishing industry, because Bezos felt books had the advantage of being easy to ship, the same item wherever they are sold, generally seen as having positive value, and relatively cheap to start with as a trial balloon. Prices were printed right on the product, and thanks to encouragement from Barnes & Noble in the early 90’s, prices had been inflated to allow for so-called discounting. The publishing industry, ever strapped for cash, was thrilled at first at Amazon’s rapid growth. Soon Amazon was selling 20, then 30, and now over 40% of the new books in the US annually. But one big customer is not a good thing for any business: it allows that customer to demand concessions: prices, payment terms, and in the case of publishing, advertising subsidies. Laws require publishers to sell to all customers at the same prices, but Amazon, building on the practices of Barnes & Noble, quickly learned to exploit the more permeable areas of promotional support. Within about five years the publishers found themselves facing some very unpleasant new realities. One after another they learned a bitter truth: you don’t work with Amazon, you work for Amazon. But by then the quicksand was shoulder deep.
Those five years were long enough for Amazon to gain a huge head start. Public infatuation with the technology of online ordering and digital reading created a tsunami that drowned many, many small bookstores. Some of them were so inefficient, with their undisciplined business practices, romantic notions of sitting and reading all day, manual card files, and dusty corners, that they deserved to go under. Others, including Eight Cousins, were forced almost to the wall. Upgrading computers and software every couple of years, creating a functioning website and e-newsletters, rising rents, dealing in a product whose price is printed right on the package, and competing with deep discounting – it seemed like there was a new hurdle every six months.
Any retailer has four areas of cost: occupancy, inventory, operations, and payroll. Rent can be negotiated within narrow limits. The cost of inventory is highly regulated, but the selling price to the customer is adjustable in most cases. When the price is printed on the product, though, adding a nickel here and a dollar there as a clothing or craft store can do, is not an option. Paring down electric bills, insurance, and printer paper use yields a tiny benefit for a huge effort.
The one area that can really be controlled, especially in a bookstore, is payroll. And so retail payrolls are dismal, always under pressure. During its first eleven years my parents, Betty and Al Borg, took no wages at all, which kept payroll under control. But when they left, in early 1998, I was filled with doubt about being able to pay for what they had freely given. Could we reduce store hours? Institute more self-service? Automate more of our operations? Was it worth the staff time to claim more promotional subsidies? Could the owner work eight days a week instead of seven? Keep people minimally scheduled so we don’t have to give them any vacation or sick leave? Health insurance? Out of the question. Forget raises! If it’s a good season we’ll give a bonus!
Thanks to extremely dedicated staff and a strong trade association, Eight Cousins held its own, has a decent website, offers e-readers and e-books, and an up-to-date digital inventory system. And thanks to customers like you riding to the rescue, twice a year I was able to give modest bonuses. Not that they amounted to enough to keep some of our staff off food stamps and Mass Health. Amazon took that money, and those funds will never touch Falmouth again.
Which brings us back to our starting point: the impact of Amazon on communities. Here’s what happened when I tried to shop online locally and at Amazon. I picked random items: a garden hose, a dog collar, a pound of fudge, a t-shirt with an anchor motif, a paperback book, a pound of Zamorano cheese, and a pair of garnet earrings. These came to $170, give or take a bit. The items purchased locally were 74 cents less than those shown on Amazon.
I was shocked, so I tried again, narrowing it down to books and hardware, where products are more uniform.
Three items from Ace Hardware – a picnic tent, a dozen jelly jars and an electric ice cream freezer – come to $41 more at Amazon. Six books at Eight Cousins come to $63.49 less on Amazon. So I “save” $22.49 out of pocket by shopping on Amazon – BUT, and here’s the big one – that little spree sucks almost $420 out of our town, less whatever the UPS and FedEx guys spend on coffee. But no arts grants. No extra library hours. No addiction rehab programs. The slightly higher $440 spent locally leaves about $200 in this community toward the things that benefit us all. The money spent on Amazon? Pennies at the most.
So to help you return to ground zero here, allow me to hand out hundred dollar bills, one per listener, please. Sooner or later, these hundreds will be spent, even if it’s by your heirs. The money will be spent. The choices are yours.
[The bills below are ‘spend locally’ reminders that Carol handed out to her audience members after the talk. Front and back sides:]
one Amazon Dollar, front side
one Amazon Dollar, back side
Thank you.
Here are the details of the online selections made for comparison purposes:
Garden hose at Eastmans, can be ordered online Ace® Flexogen® 5/8in X 50ft Garden Hose (1058050A) Item no: 71928 | 034411112038 $23.99
Comp on Amazon.: Legacy HFZG550YW Flexzilla 5/8 X 50 Zilla Green Garden Hose with 3/4 GHT Ends by Legacy $50.35/$53.99 Free shipping, Get it by Tuesday, Jun 16
Black Dog: Boston Sneaker dog collar, $26.00,
Comp on Amazon: Hunter MFG Boston Red Sox Dog Collar, Small, by MLB, $14.95
Ghelfi’s Chocolate Fudge, $12.99/lb
Comp on Amazon: $11.25 – $15.00
Comp at Amazon: Makaya Men’s Anchor T-Shirt by MAKAYA $18.95
Eight Cousins book, Euphoria, $14.95
Comp at Amazon: $11.17
Falmouth Wine & Spirits, Zamorano cheese, $11.99/lb.
Comp at Amazon: $13.99 – $22.99/lb.
Hannoush Jewelers, PANDORA Birthday Bloom Garnet Earrings, $50.00
Comp at Amazon: $50.00
[second set of selections]
Hardware at Ace comes to $248.97. The same choices at Amazon are $289.97, or $41.00 more at Amazon.
Shade Tech 10ft x 10ft Instant Canopy (157514), $59.99
Comp at Amazon: $89.99
Ball® 12oz Regular Mouth Quilted Crystal Jelly Jars 12/pk, $8.99
Comp at Amazon, $19.99
White Mountain 4 Qt Ice Cream Freezer (PBWMIMH412), $179.99
Comp at Amazon, same price
Six books at Eight Cousins come to $190.75, including current Bestseller discounts. The same books at Amazon are $127.26:
Go Set a Watchman, $27.99 (bestseller discount would bring it down to $22.39) Comp at Amazon: $16.07
Contemporary Cape Cod Artists: On Abstraction, $59.99 Comp at Amazon: $41.11
Capital in the Twenty-First Century, $39.99
Comp at Amazon: $26.22
Flora and Ulysses, paperback $8.99, hardcover $17.99
Comp at Amazon: $7.64, $11.08
All the Light We Cannot See, $27.99, less 20% as bestseller = $22.39.
Comp at Amazon: $15.88 (44% discount)
The Oregon Trail, $28.00, less 20% as bestseller = $22.40
Comp at Amazon: $16.90

5 thoughts on “Guest Post: Straight Talk on Amazon and Communities

  1. Theresa M. Moore

    You kinda brushed over books; I can actually understand that. But since most independent publishers, booksellers and authors were screwed over several times in the last 9 years, I would point out that I noticed Amazon’s exploitive practices early on, and got out while my sanity was still intact. Not only does Amazon micromanage creatives, but does everything possible to destroy a burgeoning career in writing so that it can control prices. As I said, I got out relatively early, and have not gone back. If anyone wants to read my books, they can find them on my site I refuse to give up my life to a giant retailer which gobbles up suppliers and spits them out bereft of their dignity. I did not make any money at Amazon; mostly the income went back into fees, or Amazon offered my books for free without my permission. That is called product theft. Nuff said.

  2. oliver optic

    ‘Whereas shopping online or in person on Main Street and picking things up locally, customer shipping cost is $0. ‘
    So how do you get to main street? Everyone does not live in a small town.

    1. Carol B. Chittenden

      For a bookstore, you can check, which will show you the (participating) bookstores closest to you. Of course if you’re in a truly isolated area that may be impractical, but you might see if you can work out a shipping deal with merchants you like, say, free freight above a certain minimum purchase. If you live in a city, there must be shopping areas that are more interesting than so many chained malls. Ask the staff in a favorite shop about others. Ask friends. Be independent!
      That said, there are chains where I do shop, including online. (Well, really only one I can think of at this minute, one with excellent local staff who recognize me and give excellent service.) It’s a matter of care, not religion.

  3. Summer Laurie

    I’m going to keep copies of this article in my purse and hand them out to anyone I know whenever they suggest they’ll get something from A. Thank you, thank you, Elizabeth and Carol!!


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