Amazon is coming. What happens to Iowa’s malls and local stores?

By: - February 6, 2020 3:19 pm

Retailers and owners of bars and restaurants could ask to be repaid for pandemic-related operating offenses under a new bill. Shown is Des Moines’ East Village. (Photo by Linh Ta/Iowa Capital Dispatch)

Amazon, the online retail giant, officially announced Thursday that it’s opening one of its fulfillment centers in Bondurant — months after city documents and reports pointed to its expected arrival in Iowa.

The arrival of the shopping behemoth brings along an expected 1,000 new jobs for the Des Moines metro and opportunities for same-day shipping for local residents. 

But for Des Moines’ rapidly changing brick-and-mortar landscape, what does the arrival of a warehouse mean for local stores and malls?

Experts say the arrival of an Amazon fulfillment center is just another piece of the nationally changing retail landscape that’s forced stores in Iowa to adapt to the increasing demands of convenient shopping or be left behind.

“How much do we need delivered that quickly?” said Nancy Abram, professor of marketing at the University of Iowa. “We’re seeing convenience and logistics being a real driver in consumer purchases and business infrastructure.”

What is a fulfillment center?

The fulfillment center — a gargantuan, 645,000 square-foot warehouse will sit north of Interstate 80 and east of U.S. Highway 65 in a convenient location for freight transportation.

Amazon’s warehouses, which are located in metro areas across the country, are used to ship products to customers. The Seattle-based company is growing its warehouse footprint in an effort to expedite its deliveries, offering same-day shipping to a growing number of areas.

Construction for Bondurant’s warehouse is expected to finish by November 2020, according to the Business Record. In October 2018, the Iowa Transportation Commission approved a grant of up to 60% of estimated costs to make improvements to the project — more than $12 million, according to the Business Record. 

The City of Bondurant will also waive a portion of property taxes over six years and dedicate some tax revenue to improving streets near the center, according to the Des Moines Register.

Same-day shipping for nearby cities is also made possible through a fulfillment center and the delivery center Amazon is also constructing in Grimes.

Entry-level positions in its warehouses start at $15 an hour and the company is hiring about 1,000 people, it announced on Thursday. Warehouse workers typically help fulfill orders and package them for delivery, according to Business Insider.

What is the influence on local Iowa retailers?

There is no research that’s shown yet the true impact of an Amazon fulfillment center in a community, said Anne Brouwer, a senior partner at McMillan Doolittle, a Chicago-based retail consulting firm.

The biggest change could be a positive for retailers though, Brouwer said — more disposable income.

“With the new jobs and a starting wage that’s double the state minimum, that will put a lot more money in the pocket of local consumers,” Brouwer said. “That should benefit most, if not all retailers in the area.”

An issue is finding 1,000 people to work in the warehouse. In December 2019, Iowa’s unemployment rate was 2.7%, according to the U.S. Bureau of Labor Statistics.

Workers in central Iowa may feel inclined to leave their minimum wage jobs or lower-paying positions if they’re not meeting the same pay as Amazon. Those jobs can often be in the retail and service industries, which are already struggling with finding employees.

“If you’re trying to make ends meet, you may very well change jobs to bring more in your paycheck each week,” Brouwer said.

As for actual consumer behavior, Brouwer doesn’t expect people to drastically change their shopping habits because of same-day shipping.

But busy shoppers, like people with multiple part-time jobs or hectic family lives, may utilize the service, rather than take time out of their day to drive to the store.

“There’s no question there’s a convenience benefit to consumers,” Brouwer said. But I don’t think we should expect that’s going to mean an enormous jump in Amazon sales. People will just be happy to get it a day sooner.”

For local retailers and malls, unique offerings and adaptations are needed

Liz Holland, owner of Merle Hay Mall, said she isn’t worried about the arrival of Amazon.

Its physical presence in Des Moines won’t change the shopping habits of people who are already using it for two-day shipping, Holland said.

Stores in Merle Hay Mall are already adapting to online shopping. Target, an anchor store at the mall, renovated its structure to offer delivery itself in the Des Moines area. Shops inside the mall, like Jay’s CD and Hobby and the newly opened GameDay arcade and restaurant, offer unique items and experiences that Amazon can’t offer.

“Technology is making retailers make investments to meet (consumer) needs,” Holland said. “I don’t think it changes Des Moines.”

Mike Draper, owner of RAYGUN, a local screen-printing company based in Des Moines, said his store is insulated from Amazon’s effect because the store already produces and distributes its products that aren’t replicated elsewhere.

Local and national stores that sell similar products that can be found on Amazon may face more impact, however. With the wide selection of goods and increased convenience of quick shipping, even if the arrival of Amazon hurts retailers profit margins by 3%, that may be enough to make the operation of some Des Moines store’s unsustainable.

“Walmart might have wiped out Main Street, but Amazon is going to kill your whole city,” Draper said.

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