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How Amazon wove itself into the life of an American city, Retail News, ET Retail

Prime mover: How Amazon wove itself into the life of an American city By Scott Shane

BALTIMORE: Another big Prime Air 767 takes off from Baltimore-Washington International Airport — where Amazon’s shipping last year eclipsed that of FedEx and UPS put together — and wheels above the old industrial city. Below, the online giant seems to touch every niche of the economy, its ubiquity and range breathtaking.

To the city’s southeast stand two mammoth Amazon warehouses, built with heavy government subsidies, operating on the sites of shuttered General Motors and Bethlehem Steel plants. Computers monitor workers during grueling 10-hour shifts, identifying slow performers for firing. Those on the floor earn $15.40 to $18 an hour, less than half of what their unionized predecessors made. But in Baltimore’s postindustrial economy, the jobs are in demand.

Near the Inner Harbor are the side-by-side stadiums of the Ravens and the Orioles, where every move on the field is streamed to Amazon Web Services for analysis using artificial intelligence. Football players have a chip in each shoulder pad, and baseball players are tracked by radar, producing flashy graphics for television and arcane stats for coaches.

In City Hall downtown and at Johns Hopkins University a few miles away, procurement officers have begun buying from local suppliers via Amazon Business — and even starred in a national marketing video for the company.

As federal regulators and Congress assess whether Amazon’s market power should be curbed under antitrust laws — and whether, as some politicians argue, the company should be broken up — The New York Times has explored the company’s impact in one U.S. community: greater Baltimore.

Anirban Basu, a Baltimore economist who has studied the region for years, is skeptical of apocalyptic claims about Amazon, saying Sears and Wal-Mart were both once seen as all-powerful. But he called Amazon a “profit-margin killer” and said it should be scrutinized, particularly because technological trends that include artificial intelligence, driverless trucks, drones and new payment systems all play to its advantage.

Ken Knight has felt Amazon’s long reach. He plans to close his 152-year-old Baltimore houseware and hardware store, Stebbins Anderson, at the end of the year. He pins most of the blame on Amazon.

“It’s put me out of business,” said Knight, 70. Knight is especially aggrieved by government subsidies to the company in the name of job creation; he will be laying off 40 employees.

Amazon insists, in an argument it is likely to use in antitrust proceedings, that its market power is nothing like what people imagine. Yes, it accounts for 40% to 50% of online retail in the United States — but that is only 4% to 5% of total retail. (Wal-Mart’s revenue is still twice that of Amazon, though Amazon’s total value on the stock market is the fourth largest among U.S. companies, more than double Wal-Mart’s.) And while Amazon may sell nearly half of cloud-computing services, it points out that the cloud makes up a small fraction of information technology spending.

Baltimore offers in microcosm the contentious issues that Amazon’s conduct has raised nationally. The erosion of brick-and-mortar retail. Modestly paid warehouse work and the looming job destroyer of automation. An aggressive foray into government and institutional procurement, driving local suppliers to partner with Amazon or face decline. A swift expansion in air cargo, challenging FedEx and UPS. And the steady conquest of the computing infrastructure that underlies commerce, government and communications, something like an electric utility — except without the regulation imposed on utilities.

Amy Webb, founder of the Future Today Institute, a strategy firm, who lives part time in Baltimore, said Amazon’s impact only began with its retail platform.

“It’s the invisible infrastructure that powers our everyday lives,” said Webb, who examines Amazon in her book on the tech giants, “The Big Nine.” “Most of us don’t know 95% of what Amazon is doing.”

A River Through Commerce and Culture
None of this was imaginable in 1994, when Jeff Bezos paged through a dictionary in search of a name for an online bookseller and stopped at “Amazon.” Not only was it the largest river in the world by volume — it was four times bigger than the runner-up, which appealed to Bezos’ outsize ambitions. Books were just the start.

Some 25 years later, fueled by customers’ addiction to click-and-done convenience and speedy delivery, Amazon has quietly flowed into many areas of life, bringing to more and more arenas its tireless innovation, relentless focus on data, unforgiving employment practices and omnivorous competition. More than half of U.S. households now have an Amazon Prime membership, and most shopping searches begin on Amazon, not Google. Globally, Amazon, whose critics call it the “apex predator” of digital business, delivered 10 billion packages last year — more than the number of people on the planet.

Greater Baltimore accounts for 1% of Amazon’s sales nationwide — just about its share of the population, according to data prepared for The New York Times by Rakuten Intelligence, which tracks e-commerce.

But as a transportation hub, with Interstate 95 and major rail lines converging near a busy port and airport, Baltimore punches above its weight — originating 2.38% of Amazon’s shipments in the United States, Rakuten said.

Even with all that shipping and logistics, Amazon ranks just 14th among local employers, according to The Baltimore Business Journal. Yet like an online shopper who realizes one day that half his possessions came from Amazon, a Baltimorean who looks for the company’s footprints can find them everywhere.

Through Amazon Web Services, the biggest provider of cloud computing, the company is building the country’s digital backbone. AWS employs a small staff of software engineers in Baltimore — the company declined to say how many — and provides the computing infrastructure for many institutions, from Johns Hopkins to the investment firm T. Rowe Price. Even the secretive National Security Agency, south of Baltimore at Fort Meade, acknowledged that it relied on AWS “for various administrative and mission needs.”

The arms of Amazon sometimes cross in unexpected ways. The Maryland Department of Human Services downtown partners with AWS in a cloud-computing effort called MD Think, designed to streamline social services. At the same time, the department said, it provides food stamps to nearly 600 local Amazon employees, largely part-time warehouse workers.

Even as its omnipresence draws antitrust scrutiny, Amazon seems unlikely to pull back. In June, Bezos trumpeted a new Amazon plan to launch 3,200 satellites to provide internet service around the world. He argued that Amazon’s size meant it should take on huge new challenges.

“Amazon is a large enough company now that we need to be doing things that, if they work, can actually move the needle,” Bezos said.

Bezos has long pushed the mantra of “customer obsession,” and it has paid off. In the Harris Poll on the popularity of major U.S. companies, Amazon has ranked No. 1 or 2 each year since 2012. By comparison, Google fell to 41 this year and Facebook to 94.

But putting customers’ convenience first, a key to Amazon’s spectacular growth, can put a big squeeze on everyone in the company’s long supply chains — warehouse workers, independent sellers, delivery drivers, cargo pilots — not to mention smaller competitors.

A New Kind of Assembly Line
Shaquetta Taylor, who goes by Shaq, scanned an item — a bag of glazed pecans. Her screen directed her to “Stow Item,” and the digital clock started counting — 1, 2, 3, 4, 5, 6, 7 — as she found space for it in the robotic pod.

Taylor — 43, mother of two sons and grandmother of a 3-year-old — arrived four years ago at Amazon’s warehouse awed by the company’s cachet. “When I first came here, I thought, ‘I’m not good enough for Amazon,’” she said, taking a brief break from Stow Station 3301.

But after a year, she was asked to become an “ambassador,” helping out newer colleagues at this Amazon Fulfillment Center, shorthand name BWI2, built where GM’s Baltimore Assembly Plant operated for seven decades. Its scale is mammoth: 27 acres of floor space, 2,500 employees, 14 miles of speeding conveyor belts.

If Taylor doesn’t make her numbers, she can be fired. She’s thrived because she’s fast and accurate over a demanding 10-hour shift with two half-hour breaks, one of them paid.

The warehouse is run by Preet Virdi, general manager and an Amazon true believer who moved from India to attend Georgia Tech 13 years ago. Virdi, 35, said his top priority was safety; a whiteboard recently listed 40 head injuries and 109 foot injuries so far in 2019.

The real boss is data, however. If the computers said Taylor or other “associates” are too slow or sloppy, they’re out. And if Virdi doesn’t make his numbers, he’ll be out too.

That is nothing new in industrial practice. But Amazon, with an unparalleled mastery of digital tools and the coolly calculating tone set by Bezos, has brought it to a rare extreme.

Some workers thrive despite the pace. “The day goes by quick,” said Robert Taylor, 51, a leader in the warehouse chapter of Glamazon, for LGBT employees.

Others falter. Sharon Black, 70, a veteran Baltimore activist who has held assembly-line jobs at GM and other plants, worked for a few months at BWI2 last year and found a striking difference: At Amazon, the computers ruled.

Black said she quit after two written warnings that she wasn’t meeting productivity standards, knowing a third would get her fired.

“The machines determine so much,” she said. “You’re clocked from beginning to end. They grind through people.”

Workers at Amazon who run into that kind of trouble have no unions to represent them — a shift from Baltimore’s past.

In the GM plant’s final years, line workers made an average of $27 an hour, equivalent to more than $35 today. GM workers could make $80,000 annually with overtime, according to contemporary news reports, equal to $102,000 in 2019 dollars.

The vehemently anti-union Amazon has raised its lowest hourly pay to $15.40, which is a little over double the federal minimum wage, the company points out. But even a veteran worker at its BWI2 warehouse would have to put in considerable overtime to get to $40,000 a year, less than half of what a GM worker could make in the past.

Nor are the job numbers comparable. The GM plant employed 8,000 at its peak; Bethlehem Steel employed 30,000. Amazon has a total of 4,500 workers at the two warehouses.

Amazon gets plenty of applicants. Its hourly pay is $2 or $3 higher than at many comparable employers, and benefits are also more generous: medical, dental and vision coverage and a 401(k) with a 50% match. The company will reimburse an employee up to $3,000 a year for further education or give a worker $10,000 to start a business delivering Amazon goods.

Under the circumstances, government officials here are grateful for Amazon’s presence. The company has gotten $65 million in tax incentives and loans to build the two big warehouses and related smaller facilities, according to the Maryland Department of Commerce.

The company said it had spent about $1 billion on infrastructure in Maryland to date; hired about 7,000 full-time direct employees, nearly all at warehouses; and used contractors who hired another 2,100 people.

But economists said online shopping has also erased thousands of retail jobs, and critics pointed to other costs, including traffic congestion and environmental effects, so assessing the company’s net impact is difficult. Few of the Amazon jobs in Baltimore are the highly paid tech and management positions appearing in northern Virginia, which Amazon chose for its 25,000-strong second headquarters, called HQ2.

For Black, the former employee, one experience captured what she thought was the eerily inhuman warehouse culture. In November last year, two contract workers were killed when a tornado collapsed a wall of a smaller Amazon warehouse opposite BWI2.

Black said she drove to work the next morning, wondering how the company would handle the deaths at the brief standing meeting that began each shift.

“I thought they’d have two minutes of silence,” she said. Instead, there was the usual tribute to the “power picker” — the outstanding performer in her unit, as measured by the computers.

Rachael Lighty, an Amazon spokeswoman, said the company offered counseling and hosted the most affected employees for a meal.

Despite the demanding nature of their jobs, many warehouse workers fear Amazon intends to replace them with robots. Amazon has begun testing machines that can pack boxes; and humans can be prone to injury, easily exhausted, eager to unionize and outspoken about gripes.

The robots that silently cruise through the warehouses, each carrying up to 1,200 pounds of purchases, are none of these things.

But Webb, the futurist and technology writer, said she believed Amazon had made a different discovery: that the job is presently more cheaply performed by humans than by robots.

“It’s not that the robots are taking over,” Webb said. “It’s that we’ve been relegated to robot status.”

Onward and Upward
Anyone who wants a glimpse of Amazon’s expansive appetite might pay a visit to BWI Airport. Workers are putting the final touches on a $36 million, 200,000-square-foot building, financed with tax-exempt bonds, that will dwarf Amazon’s current airport operations. There are bays for 93 tractor-trailers to load and unload at once.

The growth at what Amazon Air calls its “gateway” — one of 25 around the country — has been rapid. In 2016, Amazon Air, a new division, did not operate through BWI. The following year, Amazon moved more freight through the airport than either FedEx or UPS, the industry leaders. And in 2018, it loaded and unloaded 9,300 metric tons of goods at BWI, more than FedEx and UPS combined, though globally their fleets remain far larger.

Although its Boeing 767s are often painted with the Prime Air logo, Amazon contracts its flying to several lower-profile operators, including Atlas Air, ABX Air, Air Transport International and Southern Air. Atlas Air, the biggest Amazon flyer, pays pilots about one-third less than FedEx or UPS.

Robert Kirchner, who recently retired as an Atlas pilot and now is a union negotiator, said Amazon’s drive for speedy delivery was stretching the workforce to the breaking point.

“Atlas’ fatigue complaints are through the roof,” Kirchner said.

Atlas, responding to questions from the Times, said its pilots got a “competitive total compensation package” and flew an average of 42 hours a month, compared with an industry average of 53.

Drive five minutes from Amazon’s new air cargo hub, and you find a humbler scene: a package delivery station surrounded by Prime tractor-trailers, unmarked white vans used by Amazon contractors and the flex drivers who load their cars with packages for what the industry calls the “last mile.” Drivers use the Amazon Flex app to sign up for “blocks” — $54 for delivering a certain number of packages between 7 a.m. and 10 a.m. on one recent day, or $72 between 5:15 p.m. and 8:15 p.m.

Amazon just opened a second Baltimore delivery station. Every such station Amazon opens, said Marc Wulfraat, a supply chain consultant, means that about 40,000 packages a day, previously delivered by the U.S. Postal Service and other carriers, shift to Amazon’s own operation.

One consequence is a steady shift of work from unionized Postal Service jobs to flex drivers, many of them struggling to get by. In August, the Postal Service explained a big third-quarter loss by saying in a filing that “certain major customers” were cutting back on package shipping. In Baltimore over the past two years, the Postal Service share of Amazon deliveries has dropped from about 60% to under 30%, according to Rakuten. Amazon’s own share of its Baltimore deliveries has risen to 50% from 20% in 2017.

But the most profitable part of Amazon’s operations has nothing to do with the clamor of warehouses, airports and trucks. All but invisible to the public, Amazon Web Services hums quietly in the background of a huge and growing slice of American life.

Countless Baltimore-area businesses, nonprofits and government programs use AWS. When Baltimoreans stream a movie on Netflix instead of Amazon Prime, they are still using Amazon — because Netflix relies on AWS’ cloud computing. (The Times is also an AWS customer.)

T. Rowe Price, the global investment firm headquartered on Baltimore’s Inner Harbor, has steadily replaced its own information infrastructure with Amazon’s service.

The NFL also uses Amazon’s software tools, crunching data from more than 200 metrics in every football game. Data streams to the AWS cloud from chips embedded not just in players’ shoulder pads but in referees’ jerseys, the football and even the chains used to measure first downs.

AWS, like its cloud competitors, is especially popular with tech startups, which can pay as they grow, said Chris Sachse, founder of Think|Stack, a Baltimore company that works closely with AWS and provides cybersecurity and infrastructure consulting.

Sachse, who serves on a state workforce development board, said he saw tech jobs as a potential path for Baltimoreans without higher education because they require expertise but not degrees.

“A college degree doesn’t help you with AWS because it’s all brand-new,” he said. “A lot of people think the death of industry has made it impossible to have middle-class jobs. I think we have a path to those middle-class jobs.”

At Stebbins Anderson, the home products store dating to 1867, a 30% off closing sale is underway. Knight, the owner, recalls the beginning of his long battle with Amazon nearly 20 years ago, when customers would ask for a 6% discount to match the online retailer, which for many years collected no sales tax.

“It would have been nice to get some of the benefits Amazon gets,” he said. “But the little guy always ends up footing the bill.”

Across town, however, there’s an unexpected development in the area where Amazon got its start: books. It decimated Borders and Barnes & Noble in Baltimore. But that made room for a small, hardy band of independent bookstores, led by the Ivy Bookshop.

Like independents making a comeback around the country, the Ivy sells books at full price. Customers pay in part because they don’t like the world they believe Amazon is building, said Emma Snyder, the shop’s owner.

“Part of what people don’t like is that Amazon debases the value of things,” Snyder said. “We’re commercial spaces, but we fundamentally exist to feed and nurture people’s souls.”

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