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‘Sobering Statistics’ About the Effect of Amazon

20 February 2016

From Shelf Awareness:

One of the most well-attended and discussed sessions yesterday at the Winter Institute featured the release of a new Civic Economics-ABA study called Amazon and Empty Storefronts: The Fiscal and Land Use Impacts of Online Retail, which aims to demonstrate the effects of the growth of Amazon on American towns and cities. The study determined that in 2014, the last year for which it could get full-year statistics, Amazon sold $44.1 billion of retail goods nationwide, which is “the equivalent of 3,215 retail storefronts or 107 million square feet of commercial space, which might have paid $420 million in property tax.” Also in 2014, Amazon avoided collecting state and local sales tax of $625 million. Between uncollected sales tax and the loss of property tax, state and local governments lost more than $1 billion in revenue–about $8.48 per household in the U.S.–the study found.

In 2014, Amazon’s warehouses–65 million square feet of space–employed roughly 30,000 full-time workers and 104,000 part-time and seasonal workers. But including all the jobs lost from stores whose sales Amazon supplanted, Amazon sales “produced a net loss of 135,973 retail jobs.”

Matt Cunningham of Civic Economics noted, too, that in 2014 Amazon book sales were about $5.618 billion, some 11.6% of Amazon retail sales. That amount of sales represents about 3,600 “bookshop equivalents and 40,000 bookstore employees,” which he called “a sobering statistic.”

. . . .

Mitchell noted that the current situation with Amazon reminds her of the monopoly on railroads in the 1800s, when “they were owned by industrialists who owned other kinds of businesses such as grain mills and steel mills and used transport to mess with competitors”–until the Interstate Commerce Commission was created.

Link to the rest at Shelf Awareness

PG is always suspicious of labor economics, particularly when combined with sponsorship of an organization whose members are the legacy businesses on the receiving end of a disruptive innovation. If you look back a few years, you’ll find exactly the same sorts of studies showing Walmart as the merchant of doom. You can make a spreadsheet say anything.

Of course, pay rates for employees of small retail establishments are always at the bottom of whatever local pay scales are. Hence, the well-known phenomenon of 10 applicants for every opening at a new Walmart or Amazon warehouse.

What is also not captured in these calculations is the benefits to the tremendous number of small businesses that sell their wares on Amazon, including bookstores selling used books. PG recalls that something like 2/3 of Amazon sales are made by non-Amazon companies who sell through Amazon. That includes lots of small businesses. They’ll pay all the local and state taxes that imaginary lost bottom-dweller retail establishments will and more.

There is also no mention of the benefits of Amazon to consumers, particularly those who live outside of major metropolitan areas. Amazon (and Walmart) typically offer working class and middle-class shoppers better prices and far better selection than local merchants do.

And the wonderful Interstate Commerce Commission? The ICC grew into a monstrous, innovation-blocking government bureaucracy. It was abolished in 1995 when Bill Clinton was president.

Amazon, Bookstores

17 Comments to “‘Sobering Statistics’ About the Effect of Amazon”

  1. There is also this to consider: We are flooded with consumer goods. Not just the cheap stuff out of China, but the clothes that make it to the thrift shops.

    In my household, there are few clothes we buy new: socks, underwear, and shoes (because we wear sneakers, but if we wanted leather shoes, we’d use the thift shops).

    Also, when we go into debt, we’re essentially buying tomorrow’s products with today’s dollars. With the economic downturn, people have to buy less, if only to pay off debt.

    This is why any stimulus aimed at the retail market will fail. If people have enough stuff, they’re only going to buy new stuff that is new to market, or to replace borked stuff. Add to that the rising generation moving out (many of which get their stuff from their parents) and immigrants (at least those who are not entering low-wage jobs and can’t afford stuff), and you have a much smaller pool of people capable of buying stuff. You can’t stimulate a dead frog.

  2. What always amazes me when I read nonsense like this, is the callousness of these statists who want to reorder the economy according their academic whims.

    Not a mention of the consumer, possibly struggling to make ends meet. A river of tears for the “small business owner,” but none for the single mother buying a $9 box of cereal for his kids at a corner bodega in NYC.

    Hand wringing concern for lost tax dollars (lost mostly, as PG noted, through mathematical chicanery more than reality), yet no concern for whether those tax dollars are wasted.

    Not even a passing note that ordering things from Amazon might be cheaper and easier for people who are busy working and trying to take care of their families.

    It is very easy to make a point when you cherry pick the data you want and ignore everything else. But that is all we ever see. The media world is nothing but hacks, making bogus and incomplete arguments to support assigned points of view. And I don’t believe most of these people are SO stupid they don’t understand this, which just makes them the most repugnant form of hypocrites.

  3. “… all the modern inconveniences …” — Mark Twain

    “There are three kinds of lies: lies, damned lies, and statistics.” –Mark Twain

    .

    Poor companies and states that didn’t make as much money as they ‘might’ have because there is Amazon, cry me a river.

    All the people that saved their time/gas/legs-back (oh, and often money) shopping Amazon … hmm, I’m not seeing any tears shed on this side — oh wait, there’s a couple, but they seem to be tears of joy.

    • The other thing they leave out is I CAN’T buy locally the things I buy from Amazon because NO ONE carries them.

      So if I can’t buy them, how are the states and local municipalities going to get tax dollars on something that was never purchased?

  4. “$8.48 per household in the U.S.” Therefore Amazon saved me on average $8.48. Am I suppose to hate Amazon for saving me money? Or, is $8.48 better in my pocket or the government’s?

  5. Not having to spend the day shopping for goods which can now be shipped to my door, frees me up to go out and do other things and patronize other businesses. This is a remarkably backward-looking article.

    • The time I no longer spend driving around to get stuff has become very expensive. This morning I spent it at the shooting range. $15 range fee plus $50 shot to hell on ammunition killing paper zombie targets. They were out of real zombies.

  6. Most of the studies like this can be summed up in two words: Things Change.

    Since the dawn of civilization businesses have been changing. Businesses rise, then fall, and we are surprised because people lose jobs. Then we let mega corporations rise up and we are even more surprised when they fail and put thousands of people out of a job. But this is the way society advances.

    Amazon, iTunes, Bandcamp, Etsy and other online store fronts have done us a great service in letting artists and producers go directly to their customers. That means money that is going directly to the creator instead of the store front and all of the middle men that it took to bring that product to the store. This also means a shift in our focus as our society moves away from one mega corporation to another. But in so doing we’ve given more power to those who create, design, and code our world.

    It’s a change, but change happens.

  7. Just a reminder – neither Amazon nor any other retailer “pays” sales tax. The consumer pays the tax. The retailer simply acts as the tax collector for the government. This is the same shell game as when governments at all levels talk about “revenues,” hoping the people will forget that what’s revenue to the government is a tax to its citizens.

  8. Also in 2014, Amazon avoided collecting state and local sales tax of $625 million.

    Amazon avoided collecting tax it was not legally obligated to collect.

    Consumers evaded paying tax they were legally obligated to pay on Amazon purchases.

  9. Some “sobering statistics.” Do you know how little money a billion dollars actually is? Apart from the figure cited a few comments up from mine about it being $8.48 per household, another way of looking at it is that the amount of money Amazon’s operations ostensibly remove from the economy of the entire country is effectively equivalent to the gross income of one major Hollywood blockbuster movie. And you know how many of those there are in a year?

    But that’s not even the dumbest part. The dumbest part is that Amazon is far from the first business not to collect sales tax in states in which it doesn’t have a physical presence. Indeed, mail order businesses have operated that way for decades, including the one my father ran for several years. Indeed, the successor to that business still does operate that way, only collecting sales tax for orders from Arizona. And yet it’s only suddenly a problem now?

    And let’s not forget that Amazon currently collects sales tax from over half of the 50 states, and will collect from all of them if the legislation it’s pushing goes through.

  10. Did Sears collect sales tax back in the day when it was shipping mail-order houses and people complained that the Sears catalogue would destroy small town businesses?

    • No. There was no sales tax anywhere in the U.S. until (according to my sources) the 1930s.

      • Well, there was certainly a sales tax in Texas in the 1960’s when my parents bought my clothes and Christmas presents from the Sears catalog. And the fact that they didn’t pay that tax made a difference to a poor couple with six kids. And that despite the fact that there were Sears stores all over Texas. The mail-order operation was a completely different business, don’t you know.

        • I have the honour to inform you, Sir, that the 1960s were after the 1930s; and the 1930s were several decades after the period to which TXRed is referring.

  11. Any dollar you keep out of the hands of the professional ruling class is a dollar well hidden.

    Dan

  12. I think I would have an easier time joining the hysteria over the lost tax revenue if the government wasn’t constantly being caught flushing money down the toilet on other things . Every day it seems some govt agency is in the news for hiring no show employees or funding research to study how fast a chipmunk can void its bladder….

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