Amazon’s Reversal—The Corporate Give and Take

Just when Amazon forsakes New York City, I decide to go to my neighborhood Foot Locker for two pairs of sneakers and the saleswoman ends up ordering them online for me with “free delivery.” And so?

Amazon expects to get what it wants. It has run roughshod over Seattle local government for years—don’t dare raise employer taxes for affordable housing, enticed cities and states across the nation to give up valuable data in the food fight for a second headquarters, paid what amounts to no federal tax last year, and secured all sorts of tax incentives and enticements for their new locations. An unequaled corporate octopus, the company has muscularly positioned itself to reap whatever business welfare it can wrangle. It also needs to draw a high-powered talent pool into its orbit by locating in prime gateway cities and puts its logistics centers at the nation’s most strategic transport hubs.

The formula has worked extraordinarily. By now we all shop online through Amazon’s seamless site. Brilliantly, Bezos and Co. reinvest in the company to keep its systems ahead of the pack (its cloud computing business is now larger than the e-commerce business)—you can buy whatever in minutes and it arrives in a couple of days, sometimes sooner, inevitably beating your expectations.

Before leaving for the store, I thought about ordering my running shoes on line. I know my size. I know the brand I wanted. But I decided to amble over to the local Foot Locker a few blocks away not in a protest just out of old habit. In Manhattan these days an amble includes passing by a few empty storefronts almost on any block to remind me of the strain on in-store retailers. Are they Amazon victims? The brokers and real estate owners say everything is fine and vibrant. Really?

So, I walk into the Foot Locker which looks a bit shabby and threadbare. New carpeting would help. The walls are lined floor to ceiling with the usual over-priced basketball shoes and sneakers on rows of brackets. It’s hard to figure out where different brands are or even find the runners section. The computers at the sales desk look like they could use updating although there is a new touch screen latched to a wall mid-store to quickly check if your shoe choice is in stock. With a salesperson’s help I locate the shoe brand I want. They have three styles on display. She checks on the touch screen–the styles and colors I want are not in stock. “But I can order them for you on line.” Her store system doesn’t allow her to link directly to the Foot Locker online site. Instead she asks for her colleague’s iphone to look the site up and finds the on-line brand display—which features nine different style/colors not just three. I make my choice squinting at the i-phone screen. She scans the phone screen with a bar code device attached to the cash register computer and tells me I am getting $30 off by ordering on line. “They’ll arrive in a few days, maybe a week, depending on the weather.”

So next time I need running shoes what do you think I am going to do? And with Amazon Prime they’ll come much sooner to boot.

The mayor and governor bewail the loss of Amazon’s 25,000 jobs, while they can’t find money for restoring neglected public housing or desperately needed subway upgrades. Long Island City could use an infusion for both despite all the new luxury rental towers with riverfront views built before developers knew anything about Amazon possibly coming. And Amazon walks away from a $3 billion city-state handout, because of some citizen resistance and not wanting to deal with unions, having offered nothing in return but the benefit of its presence to local pols. How about paying for a nearby subway station revamp or a new neighborhood school in return for locating in a place that gives you what you need to feed your business—an attractively educated, highly-motivated work force in large numbers?

Truth is Amazon needs to be in New York to tap into its brainpower reservoir. It will likely bring more operations into the city over time and more high paying jobs under any circumstances.

But New York’s advantages and attractions for braniac talent will ebb unless its corporate citizens contribute their fair share for enhancing the city’s infrastructure and to help its workforce (their workforce) live decently. That means companies must pay more in taxes and not play hardball for handouts. Just providing high paying jobs isn’t enough. Or do they really want to move to and operate out of an amenity-free cow town or a far-flung inconvenient suburb somewhere? There is a reason those places are cheaper. You get what you pay for.

New York and other major jobs centers also need federal help—that is money—to keep their valuable economic engines operating so they can continue to send outsized tax contributions back to Washington to support the entire country. How about funding for revamped train tunnels under the Hudson River or greater mass transit support to help get millions of workers living in a three-state region to and from their jobs?

That means the corporate tax rate needs to increase and the loopholes eliminated so there are more funds available for infrastructure among other national priorities. The supply-sider sophistry is proving out again since the latest GOP tax cuts as tax revenues plummet, deficits widen, and bigger corporate profits go to stock buybacks not for investments. Increasing the national debt will be fine until it isn’t—that is when the debt service on our borrowings become unsustainable. A few ticks up in interest rates will take us there.

I will be buying more on line through Amazon and I am wondering whether my neighborhood Foot Locker will become another empty storefront soon and the sales clerk jobs lost with it.  Jeff Bezos is the richest guy extant while the majority of the people in the country have trouble making ends meet with virtually no savings in hand. Do you think Jeff and his company can get by on a little less and give the country and its indispensable cities which have made the Amazon opportunity possible a little more? They might be able to deliver their shipments faster and more cheaply too (on improved transport systems).

That just might be good business.

The views expressed here are the author’s own and not that of ALM’s real estate media group.