Amazon's Prices are High Costs to Communities

For many Americans, shopping online offers the convenience of low prices, fast shipping, and front-door delivery.  As online retail giants like Amazon continue to thrive and expand, however, shopping online may not be so convenient for your local economy.

With the growth of online shopping, more and more consumers are using small brick-and-mortar retail stores as little more than showrooms where they can test out a product before going home and ordering it online.  This practice, fittingly known as “showrooming,” hurts retail sales, especially among small businesses that have long struggled to compete with the online market’s low prices and convenient perks.  In total, showrooming has caused an estimated loss of $217 billion in retail sales in the United States – money that could be used to strengthen and support our local economies.

Online retail giant Amazon is at the heart of this detrimental loss.  Amazon essentially turns small businesses into showrooms for its online mega-marketplace with its Price Check app, which allows shoppers to scan items and instantly compare in-store prices to those on Amazon.  As Amazon prepares to launch five new distribution centers this year, small businesses and local communities will likely suffer from losses in sales dollars and jobs.  “Amazon provides virtually no jobs or economic benefits to the vast majority of communities from which it derives its revenue,” says Stacy Mitchell, a senior researcher with the Institute for Local Self-Reliance.  “In most cities and towns, save for a small amount paid to delivery drivers and perhaps a few third-party sellers using Amazon’s platform, all of the money residents spend at Amazon leaves their local economy, never to return.”

Shopping at small businesses, on the other hand, keeps money in the local economy, maintains the character and marketplace diversity of the community, and creates local jobs.  “Brick –and-mortar retailers employ 47 people for every $10 million in sales, according to the U.S. Economic Census,” Mitchell says.  “But Amazon employs only 14 people per $10 million in revenue.  As Amazon grows and takes market share from other retailers, the result is a decline in jobs, not a gain.”

As many as 35 percent of American consumers currently showroom, and the growth of online retailers like Amazon promises to threaten small businesses even further.  Despite the perceived convenience of online shopping, the true cost of hurting small businesses could eventually hurt us all in the form of weak local economies, homogenous communities, and job loss.  Our nation’s small businesses are more than showrooms.  They’re the backbone of our economy, and they need our support.