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Amazon Now vs. Local Businesses: The New Goliath and David Saga?
Jennifer Martin doesn’t subscribe to Amazon, so she initially had no idea why, on a day in early February, she saw two men dressed in Amazon Prime Now polos enter her Raleigh office building and hand a paper bag to a receptionist.
She later learned the Seattle-based online retail giant had opened a new warehouse in Raleigh, selected the area as the nation’s 25th metro to receive Amazon Prime Now, which provides free delivery within two hours of items bought through a mobile app, or delivery within one hour for $7.99.
The service is only available to Amazon Prime subscribers, who pay a $99 annual membership fee and receive free two-day delivery on a huge array of products.
When Martin got back to her desk and looked at her computer screen, her Facebook feed was full of people raving about the service after they had placed orders to try it out.
Martin, executive director of Shop Local Raleigh/Greater Raleigh Merchants Association, wasn’t so excited. On social media that morning, she urged people to remember to shop with locally owned businesses.
“Quickly I received tweets back saying that Prime employed local people and that I was being overly critical,” Martin recalls. “At the same time, local businesses were texting and messaging me saying thank you for your support.”
How Raleigh is Reacting
If Raleigh businesses are worried, they haven’t yet communicated that to the Raleigh Chamber of Commerce, says Vernessa Roberts, the business advocacy group’s vice president of communications.
“In Raleigh, companies from across the globe make their home here,” Roberts says. “We welcome everyone and haven’t heard any complaints.”
Amazon launched Prime Now in December 2014 in Manhattan and has rapidly added metro markets. How did it choose Raleigh to be next?
“We select our locations for a variety of reasons and one of the most important is the proximity to our customers,” says Aaron Toso, communications manager for Amazon. “We have a lot of great Prime members in Raleigh and we want to get them the things they need as quickly as possible.”
Toso says daily essentials have been the most popular items, such as bottled water, paper towels, and gummy bears.
Wait, gummy bears?
Indeed, they are the most-ordered item in Houston, Atlanta, and Nashville. Bottled water is the top seller in Chicago, Austin, and Miami. Paper towels lead the list of Prime Now deliveries in Los Angeles and New York City.
Martin worries not only about the effect on local businesses, but she noted the city loses out on sales tax when things are purchased online instead of from the corner drug store.
“Every time you use Amazon Prime Now, that’s one more sale that didn’t happen in a store here that’s paying rent, paying to make the space visually attractive, paying to be here when no-one else was,” Martin says. “Think before you click as there are real impacts in our own backyard. For better roads, for better schools, for better community, buy local and independent.”
Adoption Grows in All Metros
Whether Raleigh consumers will heed such a plea remains to be seen. Amazon Prime members elsewhere seem to like the service, with about a quarter of the estimated 41 million-plus subscribers having tried it, amounting to “extremely impressive early penetration,” according to a recent survey and analysis by Cowen & Co., as reported by Marketwatch.
Toso says Prime Now does offer a “selection of regional products.” The Cowen & Co. survey found that 26% of purchases were from local grocery stores selling their products through Prime Now.
Breaking that down further, the survey found that 33% of consumers age 18 to 34 used Prime Now to buy things from local stores, compared to 25% of the 35-54 age group and 6% of the 55-plus demographic.
Martin was asked whether locally owned stores in Raleigh and elsewhere will try to add or enhance their own fast home delivery, or do the opposite by accentuating personal contact and customer service in their brick and mortar stores.
“Many of the businesses we currently work with are already offering free delivery, pick-up, next-day service and so much more,” Martin said, “but as a community, we aren’t seeking out these options.”