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RETAILING

A new California presence for Amazon

October 19, 2012|Marc Lifsher and Shan Li
  • Amazon's new fulfillment center in San Bernardino will employ at least 700 in a region suffering 12.3% unemployment.
Amazon's new fulfillment center in San Bernardino will employ at… (Gina Ferazzi, Los Angeles…)

Once determined to remain strictly an out-of-state online retailer, Amazon.com is now undergoing a California makeover.

The world's biggest Internet retailer on Thursday inaugurated its first California fulfillment center in San Bernardino. It will receive goods from manufacturers and process orders for quick delivery to Southern California customers -- just in time for the Christmas shopping season.

Meanwhile, in San Francisco, the company has begun using a new delivery technique called Amazon Lockers. Installed in supermarkets and other stores, the lockers are intended to provide customers with a more secure and convenient way to get packages when they aren't home to accept deliveries.

And late next spring or early summer, the Seattle e-commerce giant expects to open a second, massive distribution center in Northern California.

For The Record
Los Angeles Times Friday, October 26, 2012 Home Edition Main News Part A Page 4 News Desk 1 inches; 47 words Type of Material: Correction
Amazon warehouse: An article in the Oct. 19 Business section about Amazon.com deliveries in California said that the company had begun offering secure locker services in San Francisco for customers to take delivery of packages. The same service was also introduced recently in the Los Angeles area.

It's all part of a major shift in strategy in California that began to unfold in mid-2011. Amazon and the state cut a deal that paved the way for the collection of sales taxes on purchases made by California shoppers after Sept. 15.

In turn, Amazon abandoned its earlier refusal to collect the tax and stopped a threatened referendum to overturn an Internet sales tax law.

For the Inland Empire, where the unemployment rate for August was 12.3%, the new warehouse also means jobs.

The company's latest moves were cheered by consumers who still mourn the end of tax-free shopping.

"I think it's worth the extra cost of sales tax, if I can get faster delivery or even same-day delivery," said Tim Alonzo, 25, a Miracle Mile property manager. "I always get two-day delivery now, and I don't know if I'm greedy or impatient, but I'm always going 'Ahh! Why do I have to wait two days?'"

Amazon.com accounts for nearly half of all online retail sales in the state.

Amazon's physical arrival in California and other marketing changes being introduced are aimed at meeting a big challenge that's bedeviling online executives: providing more opportunities for same-day deliveries to more buyers.

The San Bernardino center, which shipped its first book to a Nevada buyer Wednesday, is a first step.

The 950,000-square-foot operation, near the intersection of the I-10 and I-215, is located to serve an area stretching from the Central Coast to the high desert, to San Diego and into southern Nevada. It's also well placed for rail shipments on the main, transcontinental trunk line and air freight at the nearby former Norton Air Force Base.

The new facility now has 700 workers, with more hires expected soon. The next fulfillment center is slated to open in Patterson, a Central Valley agricultural town southeast of San Francisco. Amazon operates 40 such centers around the country.

The state estimates that the two logistics centers will generate hundreds of millions of dollars in new tax revenue a year for state and local governments and create jobs in the economically hard-hit Inland Empire and the Central Valley.

The facilities are well placed to speed delivery times to California's main population centers, which previously were served by Amazon warehouses in Nevada, Arizona and around the country.

"Ultimately, they made a business decision to end up with a presence in California because they know that California is a huge market," said George Runner, an elected member of the Board of Equalization, the state agency responsible for collecting the sales tax. "Part of their future is to do same-day delivery, and you can't do same-day delivery from Nevada or Arizona."

Amazon executives publicly have been downplaying growing chatter in the trade press that the Seattle company plans to move quickly toward same-day delivery.

At a second-quarter conference call, Chief Financial Officer Tom Szkutak told analysts that "we don't really see a way to do same-day delivery on a broad scale economically."

Amazon, however, recently launched a "local express delivery" -- premium-priced same-day service to any of 10 cities -- if orders are placed early in the day. For now, the service is available only in three Western cities: Phoenix, Las Vegas and Seattle.

Speedier deliveries are a crucial way for Amazon to differentiate itself as the retail "battle intensifies with Target, Best Buy, Wal-Mart and Main Street businesses," said Abe Garver, an e-commerce analyst with Focus Investment Banking in New York.

Another selling point is the new lockers, which, for now, are available in California only at selected Bay Area locations.

Kelly Cheeseman, an Amazon spokeswoman attending the San Bernardino ceremony, declined to comment on the company's long-term marketing strategy, regarding either same-day delivery or the security lockers.

Meanwhile, a major rival, Wal-Mart Stores Inc., this month began offering, on a trial basis, $10 online "Walmart to Go" same-day shipping from local stores in selected markets in the run-up to the holidays. The program started in Northern Virginia, Philadelphia and Minnesota and is set to begin in San Francisco and San Jose in early November, said spokeswoman Amy Lester.

"We have a long-term vision to win in e-commerce by building a deeper relationship with customers than anyone else," she said. "We're continually testing ways, such as the current same-day delivery test, to offer greater convenience to customers by combining online shopping with the local presence of our stores."

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marc.lifsher@latimes.com

shan.li@latimes.com

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