"We have all the right ingredients for companies to succeed in e-commerce here," said Ted Griffith, a managing director at JobsOhio, the state's economic development organization.
The Wilmington announcement preceded the company’s biggest news in its history when it announced Tuesday that it had picked New York and Northern Virginia’s Crystal City over 238 U.S. cities to split its highly sought second headquarters. The company has said the headquarters come with a $5 billion investment and up to 50,000 jobs that pay, on average, $150,000 apiece.
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Although Ohio was not chosen for the second headquarters, the $178 billion company appears to have an affinity to the Buckeye State where it’s now one of the top 60 largest employers.
In May, Amazon announced plans to open its sixth Ohio fulfillment center in West Jefferson, creating more than 1,500 full-time jobs by the end of 2019. This is in addition to fulfillment centers already operating in Etna and Obetz, with new fulfillment centers slated for Monroe and North Randall by the end of 2018, and another one in Euclid in 2019.
The new Wilmington air gateway will retrofit existing space at the Air Park, in buildings F and A. In all, it will take up 1.2 million square feet and about 35 acres. The company would not say how many jobs will be coming with the new sorting center.
“We think this operation will be consequential,” said Dan Evers, executive director of the Clinton County Port Authority, which owns and manages the Air Park.
The nation’s biggest e-retailer has about 20 gateway operations, all part of the company’s national air cargo network.
Geographically, Wilmington makes sense within Amazon’s network, given the facility’s proximity to the busy Amazon hub at Cincinnati-Northern Kentucky Airport, Evers said.
Said Evers: “Air cargo is in our DNA.”
Buckeye State growth
Amazon has invested more than $2 billion in Ohio since 2011.
But Amazon is not the only company drawn to Ohio and its strength in logistics. The roster of companies investing in large local distribution operations just in the Dayton area grows longer by the year — Caterpillar Logistics, Payless Shoe Source, Crown Packaging, Heidelberg, Spectrum, Purina, Chewy Inc. and many others.
Griffith cites proximity to consumers, a “fantastic” labor force and road system, a tax regimen that does not tax inventory — plus, more than 25 universities in Ohio with logistics programs.
“With e-com and distribution, companies are looking at how fast can we get goods to our customers,” said John Haber, founder and chief executive of Atlanta-based supply chain consultant Spend Management Experts.
Chris Kershner, executive vice president of the Dayton Area Chamber of Commerce and a leader of the Dayton Area Logistics Association, said the trend is clear.
“When we continue to see Fortune 500 companies like Amazon and P&G, and a number of others, that are investing in this area, it’s not by accident,” he said.
Companies are guided by site selection and logistics experts, Kershner said. Dayton region advocates boast that trucks can reach some 60 percent of the nation’s consumers within a day’s drive of Dayton.
“I grew up with Sears and J.C. Penny,” said Ed Mortimer, U.S. Chamber of Commerce vice president for transportation and infrastructure. “Now everything is just point and click. We just expect things to be at our front door hours after we order it.”
A 2015 Wright State University Center for Urban and Public Affairs study found that logistics has a more than $2.5 billion impact on the Dayton area.
“We have these significant companies that continue to plant a flag in the ground saying, ‘This is where we want to be,’” Kershner said.
None of this is a mystery to JobsOhio. Griffith would not comment on conversations with Amazon leaders or the likelihood of future investments in the state, but he said: “They’re smart logisticians. Logistics is what they’re selling.”
Transportation and warehousing activity grew in Ohio by a pace of 32.7 percent from 1997 to 2017, edging the national growth rate in that sector of 32.1 percent, according to a a September 2018 Ohio Research Office report on the state’s gross domestic product.
From 2009 to 2017, the transportation and warehousing sector grew by 18.6 percent in Ohio, again beating the national growth rate in that sector for the same period, which was 18.4 percent, according to the report.
In 2017, Ohio saw $17.06 billion in transportation in warehousing activity.
Two-day transit
Ohio likes to call itself “the heart of it all.” Haber, of Atlanta’s Spend Management Experts, says there’s something to that.
If you look at a UPS transit map, UPS is guaranteeing two-day ground time in transit to all of the Northeast, with the exception of Vermont and Maine, Haber said. The company makes a similar promise regarding deliveries in much of the Southeast, again with certain excepted areas.
“If you look at where the U.S. population is based and how many people are located there, (delivering from the Midwest) makes great sense from a speed-to-customer standpoint,” Haber said.
And Ohio is fertile ground. UPS has a major ground hub in Chicago and a major air hub in Louisville, Ky. Fed Ex has major air hubs in Memphis and Indianapolis, as well as a large ground hub in Pittsburgh.
UPS and Fed Ex have not built massive hubs in Ohio — which leaves opportunities for Amazon.
“That leaves an opening for Amazon in Ohio to get employees as well as to build out infrastructure,” Haber said.
However, Haber cautioned that anyone will be hard pressed to find states where Amazon is not adding infrastructure.
Amazon as an employer
Amazon has been criticized for not paying its employees well enough, amid reports that some employees need food stamps to make ends meet.
In early October, Amazon announced that it is bumping up its minimum wage, to $15. The raise goes to permanent and seasonal employees both, the company said.
According to Securities and Exchange Commission filings, the median Amazon worker was paid $28,446 last year, about $13.68 an hour.
“You’re starting to see that now the bottom end of the employees are going to be paid better,” Haber said.
Another criticism lodged at the tech giant: It pulls in rich site-selection subsidies that some states and local governments can ill afford.
According to its second headquarters announcement, the company could land more than $2 billion in tax incentives from the two new sites near Washington, D.C. and in New York.
A JobsOhio spokesman could not address incentives offered to draw Amazon to Wilmington. “We share incentives after a final agreement is executed,” the spokesman said in an email. “We do not have an executed agreement at this time.”
“It’s hard to tell if it’s a great deal for Ohio or not,” Haber said. ” It’s very, very hard to analyze.”
JobsOhio’s Griffith says Amazon has been been “a fantastic partner,” and he expressed pride in how Ohio structures its economic incentives, saying they are based on net new income to workers.
“Those jobs are going to happen somewhere,” Griffith said. “Let’s have them happen in Ohio, and then there are two great outcomes.” Employees receive income and benefits, and the state sees new tax revenue, he said.
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