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The Power of Local: 3 Reasons to Rethink Your Amazon Account

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It seems like you can buy anything online these days, but there are some things Amazon cannot deliver. Independent businesses beat Amazon in job creation, economic impact, and diversity. “Shop Local” is a common phrase, but few truly grasp the massive economic impact small businesses have on our economy. Get the facts about the power of local, and learn why independent businesses are crucial to our community’s success.

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The Power of Local: 3 Reasons to Rethink Your Amazon Account

  1. 1. The Power of Local: 3 Reasons to Rethink Your Amazon Account Photo from ecommerceguide.com
  2. 2. Why “Pick” on Amazon?
  3. 3. 1.  They’re huge •  More than half of all online shoppers skip search engines and go directly to Amazon to shop. •  $1 out of every $2 spent online is spent on Amazon (that's 50% of all online purchases). 2.  They’re everywhere and in nearly every industry •  Retail, grocery, web services, video and TV, shipping, Twitch (gaming), Zappos, Shopbop, IMDB, Audible, Amazon handmade (Etsy), Diapers.com, Amazon Business (Staples), music streaming, publish books, 7 fashion lines (national top seller of apparel), second largest seller of electronics, kindle, echo, and now they are opening brick-and-mortar stores.
  4. 4. Reason #1 Level Playing Field
  5. 5. Amazon competes with companies AND sets terms by which they reach the market Photo from bookseller-association.blogspot.com
  6. 6. Point 1: The Amazon Marketplace is not the free market Amazon has the market dominance: •  Amazon is a privately controlled marketplace and it has market dominance which gives sellers little alternative. In this arena, Amazon both competes with other companies and sets the terms by which these businesses can reach the market.
  7. 7. Point 1: The Amazon Marketplace is not the free market To put that in perspective… •  Two-thirds of all books are sold online and Amazon captures 70% of those sales. Removing a book from Amazon could lead its sales to plummet by 50% or more. •  Amazon suspended pre-orders, delayed shipping times, and modified its search algorithms to direct shoppers away from thousands of books by the publisher Hachette during the renegotiation the publisher's terms with Amazon. While the parties negotiated, Amazon suppressed the career prospects and incomes of over some 3,000 authors.
  8. 8. Controls consumer choices and takes advantage of third party users Photo from lifehacker.ru
  9. 9. Point 1: The Amazon Marketplace is not the free market Amazon has tons of data: •  They can use its massive amounts of data to control consumer choices and take advantage of third party sellers and producers.
  10. 10. Point 1: The Amazon Marketplace is not the free market 1) With that data Amazon can exploit manufactures •  Amazon has begun to exploit the data it has gathered from manufacturers to compete directly with them by producing the same products. •  Example: Upstream Commerce tracked 857 apparel items first offered for sale by Marketplace sellers and found that, within 12 weeks, Amazon began selling 25% of their top-selling items. Then Amazon can lower the price of the product so they become the default seller and place their items before third-party sellers.
  11. 11. Point 1: The Amazon Marketplace is not the free market 2) With that data Amazon can manipulate choices & prices •  Amazon uses their data to shape what we see and adjust prices accordingly. It is estimated that Amazon makes at least 2.5 million prices changes a day. •  How do you know what you are not seeing?
  12. 12. Reduces choices available to consumers + impacts liberties as producers and workers Photo from classroom.synonym.com
  13. 13. Point 1: The Amazon Marketplace is not the free market RESULT 1: Stunting business and product growth •  In a diverse retail sector, products can find their way to consumers through a vast number of streams and tributaries. When this gives way to a single river, fewer products make it downstream. •  As a result there is less diversity, invention, innovation, and jobs.
  14. 14. Point 1: The Amazon Marketplace is not the free market RESULT 2: Starting a new business has become less possible •  Number of new businesses launched each year has plummeted by more than one-quarter in the last decade according to an analysis by the Kauffman Foundation. •  In national survey by the Institute for Local Self reliance and their national partners, small business owners said competition from online retailers is their number one challenge.
  15. 15. Small businesses created nearly 2 million of the roughly 3 million private sector jobs generated in 2014 (Small Business Administration). Photo from forbes.com
  16. 16. Point 1: The Amazon Marketplace is not the free market RESULT 3: Stunts job growth •  Larger competitors crush small business, which hobbles job growth, because young, growing businesses are responsible for virtually all, new job creation. •  Small businesses created nearly 2 million of the roughly 3 million private-sector jobs generated in 2014 (Small Business Administration).
  17. 17. Reason #2 Economic Prosperity
  18. 18. Point 2: This Is Not the Way to Economic Prosperity (It is for few NOT FOR ALL) Amazon is: 1.  Destroying more jobs than it’s creating 2.  Replacing stable and full-time careers with temporary labor 3.  Undercutting the wages
  19. 19. Point 2: This Is Not the Way to Economic Prosperity 1) Net loss of jobs •  At the end of 2015, Amazon displaced enough sales at brick-and- mortar stores to force the elimination of about almost 300,000 retail jobs. •  Counting full-time, part-time, and temporary employees Amazon created 1450,000 jobs. That’s a net loss of nearly 150,000 American jobs! That doesn’t take in to account the small businesses’ service providers that also loose clients. •  Amazon’s job creation is NOT A NET GAIN!
  20. 20. Majority of jobs created are not pathways to wealth Photo from Huffington Post
  21. 21. Point 2: This Is Not the Way to Economic Prosperity 2) New jobs created are not pathways to wealth •  Amazon is replacing thousands formerly stable and full-time jobs in industries such as warehousing and with temporary employment. •  Flex labor / gig economy loopholes: •  Temporary employees are not eligible for most benefits or basic standard labor law protections. •  Misclassifying workers allows employers to save on workers compensation insurance, payroll taxes, and overtime. •  Temporary workers have to pay self-employment tax and cover benefits usually provided by employers (i.e. health insurance and retirement plans).
  22. 22. Point 2: This Is Not the Way to Economic Prosperity 3) Lower wages •  Amazon pays warehouse workers on average 15% less for comparable work. •  Low wages disproportionately affect African-American and Latino workers who compose 45% of Amazon’s warehouse work, but only 8% of Amazon’s management team.
  23. 23. Point 2: This Is Not the Way to Economic Prosperity Local businesses provide more economic opportunities •  Locally owned businesses create more jobs that employ members of our community. •  Study by the Institute for Local Self Reliance (ILSR) showed independent retailers employ 47 people for every $10 million in sales, while Amazon employs only 19 people per $10 million in revenue.
  24. 24. Local Business Multiplier Effect
  25. 25. Point 2: This Is Not the Way to Economic Prosperity Multiplier effect •  When you spend money at local businesses, the money circulates longer and has up to three times the impact than money spent at national chains. That’s because local businesses, re-spend that money throughout the local economy at a much greater rate.
  26. 26. $760 million in subsidies from 2005 - 2014 Photo from barnumcelillo.com
  27. 27. Point 2: This Is Not the Way to Economic Prosperity Subsidies and public incentives fund Amazon’s expansion •  Amazon’s total public subsidies from 2005-2014 for their fulfillment and data centers nationally equals $760 million. •  To put that in perspective that's 17% of Amazon’s global profits during this period. Amazon also reported $2 billion in free cash flow in 2014, but still squeezed local governments for initiatives. •  In 2017, the incentives now total closer to $1 billion.
  28. 28. Reason #3 Local Investment
  29. 29. In 2014, Amazon did $2 billion in sales in Illinois without hiring a single person in state. Photos from herb.co
  30. 30. Point 3: Local Businesses are Invested •  In 2014, Amazon did $2 billion in sales in Illinois without hiring a single person in the state. •  Amazon expansion on a local level has led to property vacancies, job losses, and revenue shortfalls that all fall on the community to fix.
  31. 31. Point 3: Local Businesses are Invested Independent businesses employ members of our community •  Goldman Sachs 10,000 Small Business Program at Delgado College in New Orleans, LA. •  The 25 local business owners in this cohort (pictured in the slide before) are responsible for over 350 jobs, counting both full time and part-time employees. That’s not including all the local service providers and suppliers they also work with.
  32. 32. Point 3: Local Businesses are Invested Independent businesses keep your dollars local •  Money circulates longer and has a larger impact than money spent at national chains. •  American Independent Business Alliance estimates, on average, 48% of each purchase at an independent business is re-circulated locally, compared to less than 14% of purchases at chain stores.
  33. 33. Local businesses foster a sense of place, social capital, promote civic engagement, employ our community, and bring enjoyment. Photo by Peter G. Forest - Forest Photography, LLC
  34. 34. Point 3: Local Businesses are Invested Independent businesses bring enjoyment beyond the monetary exchange for goods. •  We’re more than consumers! Our local business communities foster a sense of place, social capital, promote civic engagement, employ our community, and bring sensory and social enjoyment beyond the exchange of money for goods.
  35. 35. We can make the change!
  36. 36. Shift your shopping and sourcing!
  37. 37. Make a Change! •  In StayLocal’s 2009 “Thinking Outside the Box” report, we found that if New Orleanians shift just 10% of their shopping from a national chain store to a local business, there would be over $60 million annually injected into the local economy in the form of re-circulated dollars that would otherwise leave Orleans Parish. •  At the seven-parish metropolitan level, a 10% shift would add an additional $235 million into the regional economy
  38. 38. Policy Approaches: - Limit mega retailer's influence - Protect workers rights - Promote small business growth Photo by Peter G. Forest - Forest Photography, LLC
  39. 39. Meredith Cherney Meredith@staylocal.org 504-252-1259 www.staylocal.org @StayLocal @StayLocal_nola Stay in Touch with StayLocal
  40. 40. Sources: "All About Amazon.com Corporation." American Independent Business Alliance. N.p., 06 Apr. 2017. Web. Eness, Dana, and Dan Houston. Thinking Outside the Box: A Report on Independent Merchants and the New Orleans Economy. Rep. The Urban Conservancy and Civic Economics, Sept. 2009. Web. LaVecchia, Olivia, and Stacy Mitchell. Amazon’s Stranglehold: How the Company’s Tightening Grip Is Stifling Competition, Eroding Jobs, and Threatening Communities. Rep. Institute for Local Self-Reliance, Nov. 2016. Web. Goldman Sachs 10,000 Small Businesses Orientation. Delgado Community College, New Orleans. Jan. 2017. Address. Stay Local!, and Urban Conservancy. 2016 Report: New Orleans Independent Business Trends. Rep. The Urban Conservancy and Stay Local!, May 2016. Web. “The decline of American entrepreneurship — in five charts,” J.D. Harrison, Washington Post, Feb. 12, 2015 (citing analysis from the Kauffman Foundation); “Declining Business Dynamism in the United States: A Look at States and Metros,” Ian Hathaway and Robert E. Litan, Brookings Institution, 2014. "The Multiplier Effect of Local Independent Businesses." American Independent Business Alliance. N.p., 23 Mar. 2017. Web. U.S. Small Business Administration. SBA Administrator Honors Nation’s Top Small Businesses. Sba.gov. U.S. Small Business Administration, Apr. 2015. Web.

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