Mr. Montgomery reports that Governor Dennis Daugaard is trying to get Amazon to move a warehouse to South Dakota. The main motivation discussed in the article is sales tax revenue. According to Montgomery's numbers, South Dakota misses out on about $48 million in state and local sales tax revenue each year from unreported online purchases by South Dakotans. Amazon does about 20% of online commerce, so conceivably, getting Amazon to move a warehouse here and start collecting sales tax from South Dakota purchasers (as it does or plans to do for eleven other states), South Dakota could see over $9 million more in state and local sales tax revenue.
Unfortunately, Amazon hasn't returned the Governor's calls yet. One possible reason: Governor Daugaard is barking up the wrong business model. According to this Slate article by Farhad Manjoo, putting warehouses in "faraway, low-cost states" was Amazon's old business plan. Amazon is shifting now toward placing warehouses right next to big metro areas in order to maximize the number of customers it can reach with same-day delivery. A warehouse at the I-29/I-90 nexus would place Minneapolis, Omaha, and Des Moines within a one-day delivery circle... but placing that warehouse in Albert Lea would do the same thing and put a big chunk of deliveries closer to the concentrated customer base in the Twin Cities.
Plop a warehouse in Sioux Falls or Brookings, and you're within six hours of over 800,000 South Dakotans. Plop a warehouse in Wayzata or Northfield, and you're within two hours of almost 3 million Twin Cities metro residents with more disposable income.
Even if the Governor proves me wrong, the benefits of landing an Amazon warehouse may be overstated. Bring Amazon to South Dakota, and same-day delivery knocks down one of the lingering advantages that local retailers offer over online retailers, the ability to put that new toy in your hands right now. Leveling the sales-tax playing field won't matter if Amazon continues to crush brick-and-mortar sellers on price and finishes them off by competing on delivery time. Losing more local retail to Amazon eats into the projected gains in sales tax. And working in an Amazon warehouse is no picnic (but then neither is milking cows).
When we add in the cost of the inevitable corporate welfare we would hand to Amazon for giving us the privilege of working in their warehouse, we must wonder if we wouldn't gain just as much by distributing those same handouts to existing local retailers. How about instead of subsidizing a giant international corporation that already has South Dakota businesses on the ropes, we subsidize local retailers? Give them a kickback as Madison does with Custom Touch Homes. Rebate them half of the sales tax they collect, on the condition that they use the money to renovate their Main Street storefront, raise wages, or even provide price-matching discounts to counter online out-of-state competition.
Landing an Amazon warehouse might be better than a kick in the head. But investing in local business might be better than pursuing another big corporate pipe dream that won't produce all the promised benefits.
Amazon's ability to give same day delivery without forcing a customer to leave home may cost more jobs than a warehouse will provide: http://www.slate.com/articles/business/small_business/2012/07/amazon_same_day_delivery_how_the_e_commerce_giant_will_destroy_local_retail_.html?tid=sm_tw_button_toolbar
"Sioux Falls’ proximity in the middle of the country with an airport and two interstate highways makes it a good option for distribution centers."
The same can be said for just about any place in the Midwest with an airport and interstate access. Also, it's nowhere near the middle of the nation's most populated areas.
This is just Daugaard's team throwing an idea out to the public so we all think he is doing something. Everyone knows what Amazon is so it's a gossipy topic that makes Daugaard look like a hard worker.
Show me results and I'll be impressed.
Amazon in South Dakota, now that would be interesting. Amazon is among the biggest and best know brands that filed an amicus curiae brief in support of Gill v. Office of Personnel Management, calling the Defense of Marriage Act unconstitutional.
Their influence could go beyond economic.
Good point, Jana! A Facebook friend reminds me that as Palin-conservatives make a pietisitic show of eating Chick-Fil-A sandwiches to flip liberals and lovers of equality the bird, Amazon's boss Jeff Bezos is putting big money into passing a same-sex marriage referendum in Washington state.
Here's a partial list of major brands that signed the amicus curiae brief in support of same sex marriage. As an aside, I would encourage Ed and Pat to boycott them immediately.
Google, Adobe, Microsoft, Apple, IBM, Qualcomm, RealNetworks. That might put a crimp in there online activities...
Here's a few more: American Airlines, Delta Airlines, United Airlines, Southwest Airlines, Best Buy, Coca Cola companies, Pepsi companies, Ford, General Motors, General Mills, Clorox companies, McDonalds, Levis, Marriott Hotel corp, Hilton corp, Nike, Proctor & Gamble, Sears, Target, Home Depot, J.C. Penney, Walgreens, UPS, Walt Disney companies, Starbucks, Wells Fargo, Goldman Sachs...and the list goes on and on...
Collecting more sales taxes from South Dakotans does nothing for the economy here. It just moves money from a lot of pockets to a few pockets here. That won't bring significant money or development to SD. Converting beetle bitten trees to cardboard for Amazon would do more.
Big event centers suck money out of SD like a money vacuum cleaner. Denny Sanford and Premier dumping money into the SF event center to as the mayor says, "keep it in the black" doesn't mean it is really in the black, just that people getting ripped off with crappy credit card terms subsidize the center.
$750,000 a year put into science and medicine scholarships would do a lot more for South Dakota.
Bread and circuses however have a long history in mediocre systems.
Speaking of Chik-fil-A, I have no problem with the CEO saying he doesn't support same sex marriage. His spending of what could be my money on millions of dollars attacking gay rights does. He, and his company have spent over $5 million on groups who seek to dehumanize the gay community.
His first amendment rights were never in peril or under attack. The fact that his comments could trigger a free market response was the risk he chose. Some of that free market response has helped him...some has hurt.
Best commentary on the Chick-fil-a silliness is definitely from Jon Stewart and his Daily Show.
http://www.thecomedynetwork.ca/shows/thedailyshow
http://redtape.nbcnews.com/_news/2012/08/03/13089943-no-one-will-say-the-t-word-but-internet-sales-tax-is-all-but-inevitable
Douglas if you think the naming rights money is bad for Sioux falls I have to question the quality of the GED prep course you took.
You can pretty much ignore Southdacola on the topic completely. They didn't build it downtown, that's the only fact that will matter to that small chummy group of morons. As a sf citizen what good does it do me to subsidize an area of the city that can't attract a single national business on its own?
As far as Amazon, snooze. What is in it for me? More tax? Screw that. You could probably achieve that by passing a law.
I wonder if Daugaard pitched the fact that South Dakota workers seem to be able to work under any conditions.
LK, I'll bet that's a big part of the pitch... as well as the alignment of South Dakota's and Amazon's thinking on organized labor.