Amazon.com, Inc (NASDAQ:AMZN) is widely known to be a prime killer of local retail shops and businesses. Like Wal-Mart Stores Inc (NYSE:WMT) did with its big brick and mortar stores when it came into small town America and sent locals scrambling for going out of business signs, Amazon has done the same by simply offering goods and services cheaper and easier to buy online. The result continues to be great for Amazon stock and not so great for other retailers.
In fact, in the U.S, so far this year over 300 retail companies have thrown in the towel resulting in bankruptcies by the bushel. And the carnage goes further, as many of the retail companies are prime tenants for shopping malls dotting the nation.
The result is that out of the some 1,100 remaining malls in America, some 400 may be forced to close in the coming months.
The impact on jobs has been devastating. According to the Bureau of Labor Statistics (BLS) retail jobs are dropping so far this year by an average of 13,000 each month.
This is a serious impact on a U.S. economy that’s already not creating much growth and prosperity for the lower-wage working class that dominates the retail sector.
Not Just Jobs, Taxes Are Lost
Then there’s the additional impacts on state and local tax bases. As retailers close, they take away not just jobs and payroll taxes, but they also take away sales and business taxes.
And then the empty buildings threaten to become white elephants for communities. In addition, with malls and retail stores boarded up, there is a wave of property tax valuation challenges for the properties. And many of these challenges result in reduced property tax levies for not just the shuttered buildings, but also for similar properties still operating.
Walmart has been one of the leaders on this front. The company has been citing the reduced tax values of similar big box stores near their own still operating locations and getting reduced tax valuations for even their own operating store properties. The end result? Even more local taxes are lost.
Amazon As Savior?
Amazon, while being the dominant leader in displacing brick-and-mortar retails stores and malls, is now coming to the rescue.
To start, Amazon has currently opened some 21 retail centers in malls and retail locations around the U.S. and is planning to open up to 100 more in the coming months. These centers include Amazon lockers where online purchases can be delivered and later collected by customers in a dry and secure way rather than left on rainy front porches.
In addition, many of these centers are also providing retail shopping for numerous goods and services offered by Amazon and its vendors. These include smaller electronics as well as physical books and other items.
These result in a return of retail jobs, as well as local sales and business taxes and property tax revenue streams. And it also means in states that didn’t have any physical Amazon presence, that all online sales to residents become taxable, driving a further resumption of tax revenues.
Then it gets even better. Many of those closed mall properties and empty big-box stores are in central locations in communities around the nation. This has drawn the attention of Amazon, which is now turning these properties into warehouses where goods can be stored and used for local delivery.
It’s that last mile that continues to be a big fixation for Amazon, with its Amazon Now and Amazon Pantry same-day delivery services becoming a bigger part of Amazon’s online sales.
That should only expand at a faster pace with the pending acquisition of Whole Foods Markets, Inc. (NASDAQ:WFM). The need for expanded warehouse space for the combined companies and existing and expanding food delivery services will drive that process further for Amazon.
One of Amazon’s recent deals was at the Randall Park Mall in Northern Ohio. The converted mall is resulting in a big turnaround for the property and the community, but also for jobs — Amazon says it will result in 12,000 new hires.
And Amazon is going further. One of the biggest business units for Amazon is its Amazon Web Services (AWS). The cloud computing services needs server space that’s plugged into reliable power grids. And again, old, closed retail spaces can play directly into Amazon’s need.
Even before the Whole Foods deal, Amazon has announced that it will be hiring a vast number of local employees to staff these new properties. So far, Amazon has stated that the warehouse operations will employ 100,000 new hires that will be full time and 30,000 part time hires by the first half of 2018.
That’s a massive reversal of fortune for those who lost their old retail jobs as well as for local communities that lost retailers and mall properties.
Amazon isn’t the lone savior in this market. Other companies with increasing online operations are following suit in taking over existing properties for warehouse and other needed space. Walmart with its Jet.com unit; Wayfair Inc (NYSE:W) and Alibaba Group Holding Ltd (NYSE:BABA) are all expanding their deals to lease or purchase existing space for warehouse usage.
And according to MWPVL International Inc, a Canadian-based privately held logistics consultancy company, the U.S. online retailer market should continue to demand warehouse space at a staggering pace. For according to its surveys, over the trailing 10 years from 2007 to 2017, the compound annual growth rate (CAGR) continues to run at an annual rate of 35%.
All of this means more jobs and more taxes for local communities, particularly in Middle America and flyover country.
And it’s not just the retailers like Amazon, but also the companies that contract for some of the delivery of goods sold online. FedEx Corporation (NYSE:FDX) just announced its deal to take over space in the Big Town Mall in Mesquite, Texas just east of the Dallas Fort Worth area.
Bottom line, Amazon and its peers and related companies might not have cost retail jobs, but instead transformed them and could expand job growth and economic growth in Middle America and flyover country. Good for local markets and good for Amazon stock.
As of this writing, Neil George did not hold a position in any of the aforementioned securities.