In an effort to expand its delivery network in the Midwest and shorten the time it takes to get packages to customers, Amazon.com is building a cluster of large and small distribution centers in southeast Michigan.
The 1-million square foot warehouse in Livonia, is expected to create up to 1,500 jobs and open in the fall.
"There are a lot of contributing factors that go into our thought process as we decide where to place a new fulfillment center," Amazon spokeswoman Shevaun Brown said. "Most importantly, we want to make sure a fulfillment center — like the one in Livonia — is placed as close to the customer as possible to ensure we can offer a great Prime service and fast shipping speeds to customers."
Prime is the Seattle-based online retailer's subscription service, which, for an annual fee of $99 or monthly fee of $10.99, Amazon shoppers receive special benefits, including free, two-day shipping. It is designed to instill customer loyalty and generate a steady revenue stream.
By expanding its distribution network, Amazon can push Prime subscriptions and reduce the time it takes to get packages to customers. This helps undercut one of the key advantages that brick and mortar stores still hold over the online seller: instant gratification.
Brown declined to discuss Amazon's specific strategy and plans in Michigan — even to the extent of not confirming one of the centers thathas already been announced by state and local officials.
But, based on what the tech company has done in other states and interviews with retail and real estate consultants, as well as local and state government officials — most of whom declined to comment publicly — Amazon's distribution network is likely to include five centers.
In addition to the center in Livonia, Amazon is expected to open a smaller distribution center in Hazel Park employing about 100 people by the fall; a large center in Romulus employing about 1,600 people within a year, and a large center in Shelby Township, which would employ 1,000 people and could receive financial incentives from the state. Amazon opened a small center in Brownstown Township in 2015, which employs about 300 people and is being remodeled.
When complete, Amazon's distribution network in Michigan is expected to sort and ship packages throughout the state and Midwest. It represents more than $230 million in private investment and creates more than 4,200 new jobs.
“Typically — when we do build out a fulfillment network — we try to make sure that as we build that out, we have multiple types of centers relatively close to each other," Brown said. "We see the continued demand from our customers to our low prices and great selection and are building capacity in Michigan to support that demand."
A cluster of centers
So far, the Michigan Economic Development Corp. has announced centers in Livonia and Romulus.
The one in Livonia will ship large items, such as household decor, sporting goods, and big-screen TVs throughout Michigan and potentially nationwide. The one in Romulus, with 2.3 million square feet of space, will ship smaller items.
To get a sense of scale, the Ford Field arena is about 1.8 million square feet.
In Hazel Park, a 137,000-square-foot center is set to open in a new development, the Tri-County Commerce Center, according to Amazon, city officials and commercial real estate consultants. It will deliver small packages directly to customers in the metro area.
City officials held a ribbon-cutting ceremony for the development earlier this month.
"Obviously, we're excited that Amazon has decided to put a large footprint in the City of Hazel Park," said Edward Klobucher, Hazel Park's city manager. "This is going to be a boost for our city, it's going to be a boost for the region."
The center in Brownstown Township, a Downriver municipality, is about 200,000 square feet and is already set up to sort small packages that are delivered to doorsteps by the post office. Remodeling of the center is set to be completed next month.
Speculation began swirling last week that Amazon also could be coming to Shelby Township through the development of a more than 1-million square-foot distribution center at the former Visteon site.
"There may be news in the near future about other announcements," Brown hinted. "But, that’s not confirmable because things move really, really fast at Amazon and that’s by no means 100%.”
County, township and state officials would not publicly confirm whether Shelby Township is being discussed as a potential Amazon distribution center.
The MEDC — the state's economic development agency that likely would be involved in offering Amazon economic incentives if it decided to locate in Shelby Township — praised Amazon's decision to locate in Michigan.
"It's part of the transformation of the Michigan economy," said Frank Provenzano, an agency spokesman. "It shows Amazon is looking at Michigan as a strategic location primarily because of the population center and network of transportation routes, whether it's highway, airports or rail."
Michigan, he added, beat out bids from neighboring states, including Ohio and Indiana.
To seal the deal for Amazon's two announced centers — in Livonia and Romulus — the state offered $12.5 million.
In addition to the jobs created, the state also hopes that the two new centers will spur additional development, such as new homes for workers and suppliers that wish to be closer to the distribution centers.
Not long after the Amazon deal in Romulus was announced in June, Russell Neal, 48, of Southfield, wanted to know where he could apply for a job.
"I'm just trying to get my foot in the door," he said, adding that he doesn't know what the prospects would be for someone who, like him, has no college degree. "Amazon is blowing up."
Amazon started by selling books in 1994 and now sells a variety of items, from electronics to jewelry to clothing.
In May, Amazon offered $13.7 billion to buy Whole Foods, an organic grocery chain and is expected to leverage its distribution network to food, which some retail industry watchers have said could play into the company's distribution network expansion as well.
Amazon now has more than 75 large distribution centers in North America that employ more than 90,000 full-time workers, according to the company.
The retailer is so big that some estimates put the company's sales at 20% to 30% of all goods sold online in the U.S., and is threatening brick and mortar stores.
Ken Nisch, the chairman of Southfield consulting firm JGA, said Amazon's centers in Michigan are good for the state's economy, despite the fact that the retailer's growth is leading to job losses at traditional retailers, such as Kmart, Sears and Macy's.
While Livonia, for example, is set gain jobs from Amazon, it also lost retail jobs with the closing of its lone Kmart.
Amazon said the average pay for jobs in its distribution centers is 30% higher than the pay in traditional retail stores, and the company offers health insurance, retirement savings, bonuses and the potential to own company stock.
In Michigan, pay is expected to average about $14 an hour.
Nisch said the loss of traditional retail jobs through a shift to more online sales is inevitable.
"It's much better to have those distribution centers in Michigan than in Indiana or Ohio," he added. "At least we got a little piece of the pie — or maybe a good piece of the pie — rather than no pie at all."
Still, the company has come under fire not just from retail competitors, but from employees who have complained about the company's demanding — and secretive — workplace culture.
In 2015, the New York Times interviewed more than 100 current and former Amazon employees who "described how they tried to reconcile the sometimes-punishing aspects of their workplace with what many called its thrilling power to create."
The long Times article, among other reports, offered a portrait of a tech company that sought elite workers who were quick, competitive, and obsessed with customer service.
It detailed how Amazon fostered a hard-charging workplace and encouraged workers to toil long hours and answer e-mails at all hours, even past midnight. It said the company had set up ways employees could secretly complain about colleagues and demanded secrecy through confidentiality agreements. It quoted one employee as saying: "Nearly every person I worked with, I saw cry at their desk."
Amazon responded with its own article, penned by Jay Carney, an Amazon senior vice president and former White House press secretary, that countered that the Times report was flawed and based on accounts from disgruntled employees.
"The criticism that those articles were bringing up don't ring true," Brown said. "I don't think it's an issue at Amazon any more."
The Amazon smile
Brown, who said she worked briefly in a large Amazon distribution center in Arizona, described it as an air-conditioned warehouse that smelled like cardboard. Inside, rivers of conveyor belts teem with yellow bins.
Packages, she said, went from stacks to carts, to conveyor belts to packing stations, and then into trucks as music — the beat to which pickers, packers, and shippers work, but don't always agree on — played.
Many centers, she said, run 24 hours a day, 7 days a week. Workers wear comfortable clothes. The essential rule, though, is no loose clothing so it doesn’t get caught in machinery.
To keep workers motivated, Brown said, the company does things like let employees be the guest DJ, the person who picks the music playlist for the center for the day. The company also tends to find just about any excuse to give out a commemorative T-shirt.
In the centers, pickers get the items, packers put them in boxes, shippers put the packages on the trucks.
When shipped, Amazon's boxes are always lined up so the curved arrow in the retailer's logo points upward, Brown said. In that position, she added, the logo on the box becomes what the company refers to as its smile.
Contact Frank Witsil: 313-222-5022 or firstname.lastname@example.org