Small Merchants Brace For Competition From Amazon’s Prime Now

By Lorraine Mirabella and Natalie Sherman
The Baltimore Sun.


Sandy Piper’s family has been merchants in Baltimore’s Hampden neighborhood for more than 40 years, but when she retires someday, she’s not sure there will be any business left.

Expenses have increased, customers aren’t spending more and online shopping has cut into sales at Sandy’s Bargain Center. Now, with the announcement that Amazon will launch one- and two-hour delivery in the city, she’s worried that even last-minute purchases won’t lure people into the shop.

“I can’t tell you what the future is going to look like,” said Piper, 51. “Hopefully I’m not out of business in 10 years, but if I am … it’s probably because of the Internet.”

Traditional retailers have long grappled with how to best adapt and compete in the online shopping age, and Amazon’s Prime Now is seen as yet another hurdle for Baltimore’s small merchants.

“Volume is everything in the retail business,” said Patrick Donoho, president of the Maryland Retailers Association. “Every time somebody clicks for Amazon, that’s a lost sale for a brick-and-mortar store. I call it death by a thousand clicks.”

The one-hour delivery guarantee will be available in coming weeks in select ZIP codes to Amazon Prime subscribers, who pay $99 a year for unlimited free two-day delivery on more than 20 million items. Consumers will pay $7.99 for one-hour deliveries. Two-hour delivery will be free.

Thanks to the opening in the next couple of weeks of a massive Amazon distribution center in the area, consumers will be able to get goods from toilet paper and soap to headphones, toys and TVs in short order at their doorsteps. Amazon said the service is focused on “daily essentials,” but also includes books, music, shoes, apparel and other purchases.

It’s expected to catch on in the Baltimore area the way it has in New York, the only place it’s available now, retail experts say.

Amazon plans to continue adding Baltimore-area ZIP codes _ and new categories of merchandise. It has similar plans for Miami.

“We will continue to listen to customers and respond to the items they need and want,” Amazon spokeswoman Kelly Cheeseman said in an email.

Donoho said it was tough to quantify the impact Amazon could have on area businesses, but its one-hour delivery service, known as Prime Now, could be especially hard on small grocers, pharmacies and drug stores. Household cleaning products, paper goods, snacks, bottled water and pet food have been among the most popular items sold in New York, Amazon said.

“The independent grocer is becoming a rare find, so to speak, in Baltimore City,” and grocery retailing in particular has become hyper-competitive, Donoho said. “As this expands, it makes it far more difficult to compete.”

Many independent grocers are doing everything they can to compete, and already deliver to customers’ homes. But they lack the marketing and brand power and volume of Amazon, which has built its following largely on convenience as well as price, he said.

Few things irk retail owner Beth Hawks more than those boutique shoppers who scrutinize and try on merchandise, then pull out their smartphones and search online for better deals. Amazon’s expansion will likely only encourage such consumer behavior, known as showrooming, said Hawks, owner of a jewelry and gift boutique.

Hawks said she would respond to Amazon’s delivery offer by telling her customers, “If you need me to drop something off to you, I’ll be more than happy to.”

She added, “We need people to get out and support small, independently owned bricks and mortars. I don’t want to live in a world where I can’t go in a store and touch something and walk through a neighborhood and get to know your community. … I have people who have come in for years now. Is Amazon going to know your kids or grandkids?”

Piper, whose store sells toys and clothing, including Orioles and Ravens gear, estimated that Amazon has cut into about 20 percent of her sales. This year, bad weather made things worse.

“I used to be able to make good money, but no more. We’ve struggled this year,” she said.

She said she fought “tooth and nail” to stop a Wal-Mart proposed for nearby, but the support for Amazon was daunting.

The city and state offered Amazon about $43 million in job creation and property tax credits, as well as loans, to persuade it to put a warehouse in Baltimore.

City officials were “pleasantly surprised” that Amazon chose to roll out the one-hour service in Baltimore as one of its early markets, said William H. Cole IV, president of the Baltimore Development Corp.

Amazon has said it intends to hire about 1,000 people at the distribution center by the end of 2015, but the warehouse, with 2,000 parking spaces, has room for additional workers. Cheeseman said the company has hired additional workers for Prime Now but did not disclose the number.

“I would have to believe that if it is successful and continues to grow, that it will mean more jobs for Baltimore-area residents,” Cole said. “I just think it’s nice that Baltimore is at the front end of new technologies for once, as opposed to having to wait.”

Benn Ray, president of the Hampden Village Merchants Association, said it was “bad policy” to offer incentives to the company to locate in the city, given the threat to traditional retailers, which are reliable producers of tax revenue.

“If you see more and more small businesses closing at a disproportionate rate, the causality is going to be Amazon coming to Baltimore City,” he said. “Who’s going to open any sort of business right now, in this environment, when Amazon is going to underprice anything you’re selling and deliver? There’s no reason for another store, large or small, to open in Baltimore City again.”

Ray, a founder of Atomic Books, said his comments may be a “tad hyperbolic,” but even more limited effects will hurt businesses.

“It’s all pure conjecture at this point, but Amazon initiating a one- or two-hour delivery in Baltimore City, there’s going to be economic impact and it’s not going to be good for anyone else that’s selling what Amazon has been selling. And what Amazon is selling is what everybody else is selling,” he said.

Cole said it is too early to determine Amazon’s impact on brick-and-mortar shops.

“It’s certainly impossible to evaluate the impact until you see how quickly this particular product penetrates the marketplace,” he said. “It’s something that we’ll have to evaluate.”

Ernestine Hohman, a longtime store manager, is one merchant who expects no ill effects.

“The majority of the people that live in our area (are) … hands-on,” she said. “They like to see what’s in the store other than those essential things.”

Donoho, for one, said despite his concerns about Amazon’s growth, he never expects online shopping to completely replace buying in stores.

“I don’t see brick and mortar going away,” Donoho said. “It’s the lifeblood of the community in Maryland. You need retail to make a vibrant downtown.”

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