Retailers shift their ad spending from TV, radio and print ads to digital ads.
The move follows a sales tax deal with the state.
Amazon.com Inc. will open at least two new fulfillment centers in California over the next year or so, a move that follows an online sales tax deal between the e-retailer and the state that calls for Amazon to expand its distribution operations there.
Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, declined comment, but the details were spelled out in announcements from developers. As early as this fall, Amazon plans to take over a 950,000 square-foot facility in San Bernardino, CA—located in Southern California, east of Los Angeles—according to the other companies involved in the project: Hillwood, a commercial real estate investor and developer, and Clarion Partners, a real estate investment manager. The facility will operate under a joint venture called Golden State FC LLC.
Additionally, Amazon plans to open a 1-milion-square-foot fulfillment center in Patterson, CA, which is just east of the San Francisco Bay area. That facility should open in the second quarter of 2013, says USAA Real Estate Co., the developer. Golden State FC LLC also will operate this warehouse; the landlord will be USAA Real Estate.
The fulfillment moves come after California Gov. Jerry Brown signed a law in September that requires large online retailers to begin collecting sales tax from state residents next year, unless a new federal law preempts it. The law covers retailers doing $500,000 or more a year in online sales to California residents. The law was enacted after Amazon won a postponement of the sales-tax collection requirement until next year; in turn, Amazon promised to build warehouses in the state, creating at least 10,000 new full-time jobs and hiring 25,000 seasonal workers by the end of 2015.
The two new fulfillment centers represent only the initial warehouse moves by Amazon in California, says Colin Sebastian, an investment analyst for Baird Equity Research. “We expect Amazon to open 5 to 10 facilities in California over the next three years,” he writes in a research note today. “We note that ongoing 30%+ revenue growth requires Amazon to invest continuously in fulfillment efficiencies and additional capacity.”
Amazon’s sales increased 34% in the first quarter, while spending on fulfillment increased 51.5%. Amazon operates 69 fulfillment centers worldwide, a company spokesman says; he did not say how many were in North America.
Stephen Kranz, partner at Sutherland Asbill & Brennan LLP, will discuss the online tax issue at the Internet Retailer Conference & Exhibition 2012 in Chicago in June in a session titled “The new urgency for developing a state sales tax strategy.”