Regular consumers aren't the only ones shifting more of their spending to Amazon.com.
The city of Atlanta, Denver public schools and the Mesa, Ariz., Police Department are among the 1,500 public organizations that since last year have signed new contracts to buy office supplies, books, even musical instruments directly from Amazon, according to a report released Tuesday by the Institute for Local Self-Reliance, a non-profit group that advocates for strong local economies.
The contracts with Amazon could drive billions of dollars in public spending to the online giant in coming years, propelled in part by the ease of purchasing online -- but which, like in consumer retail, risk penalizing independent retailers. (Amazon founder and Chief Executive Officer Jeff Bezos also owns The Washington Post.)
The local deals are part of a larger contract Amazon signed in January 2017 with U.S. Communities, a purchasing cooperative that negotiates contracts with suppliers on behalf of its members, which include a number of municipalities and government agencies. The five-year contract, which can be renewed for up to 11 years, is currently valued at $500 million a year. The U.S. Communities contract was last held by Independent Stationers, a group of independent suppliers around the country. Amazon already sells to tens of thousands of local governments and agencies, according to Amazon spokesman Lori Torgerson.
"As public dollars shift to Amazon and away from local independent suppliers or even national chains with local stores, cities are undercutting their own local economies," said Stacy Mitchell, co-director of the Institute for Local Self-Reliance and a co-author of the report. Mitchell says the new contracts also hurt national chains like Office Depot and Staples that have stores in some of the communities that also purchase from them.
Amazon, which pays local taxes where required, said its contract continues to support small businesses. "The competitively-solicited contract helps education and public sector organizations purchase directly from the Amazon Business marketplace, which includes small, local and socio-economically diverse businesses," said Torgerson.
Christine Gilbert, a spokesman for U.S. Communities, added that the Amazon contract "supports supplier diversity" by allowing agencies to work with a range of businesses that sell items through Amazon's marketplace. More than half of the site's sales now come from third-party merchants.
But the Institute for Local Self-Reliance says the contracts do not include price guarantees or volume discounts that are typical of public purchasing agreements, potentially putting cities and counties at risk of over-paying for basic supplies.
"What's striking here is that Amazon won this contract without having to compete on price," said Mitchell. "This contract deviates from the norm in significant ways that put local governments at risk for spending more and getting less."
A spokesman for Amazon said the company was one of a dozen suppliers that responded to a formal request for proposals for the U.S. Communities contract.
Guernsey, an office products company in Dulles, Va., has been selling janitorial supplies, office products and furniture to government agencies for more than 40 years. But recently, founder David Guernsey says, the company has struggled to compete with Amazon's selection of tens of millions of items, compared to the 50,000 he sells on his site.
About a year and half ago, he began creating spreadsheets for his clients showing how his fixed prices compare with Amazon's at a given moment. Most of the time, he said, his prices were lower.
"We're bleeding business to Amazon," Guernsey said. "There's this perception that Amazon has everything and that it's easy to use, but we've been providing next-day delivery for three decades. It's not as if they've invented the wheel."
Officials at Prince William County Public Schools in Northern Virginia say they plan to spend roughly $1.5 million on Amazon purchases this year. The site has become a "one-stop shop" for school administrators, who are already accustomed to making personal purchases through Amazon, said Anthony Crosby, the school district's acting purchasing supervisor, who helped negotiate the contract on behalf of U.S. Communities.
"Before this contract, people were out here independently setting up Prime accounts and making purchases," he said. "All this does is create a legal pathway for them to do so."
Denver Public Schools spent $1.6 million on Amazon orders in 2016, while Salt Lake County, Utah; the City of Austin; and the Portland, Oregon school system each spent more than $500,000 on the site that year, according to the ILSR report.
Amazon has been aggressively building up its government business in recent years. It hired Anne Rung, who oversaw procurements for the Obama administration, to lead its public-sector division in 2016, and last year forged an agreement with the Department of Homeland Security that allows workers to make purchases directly from Amazon. Amazon spent $12.8 million lobbying the federal government last year, up from $11 million a year earlier, according to watchdog site OpenSecrets.org.
Business on 07/11/2018