Tearing down and building up: Amazon wants Deliveroo, opens 4-Star store

It’s has been a busy past few days for Amazon:

  • Amazon has been in preliminary discussion to buy Deliveroo, which is based in London and sends out cyclists to deliver food. It now serves 200 cities in 12 countries and has a valuation of over $2B. (Reuters)
  • Amazon also opened its first 4-Star Store in SoHo. The store only sells items that are ranked four stars or more on Amazon. (The Verge)
  • The company announced it is raising its minimum wage across the company to $15 an hour. (CNBC)

On the surface, the first two – the potential Deliveroo acquisition and the 4-star store- are services that Amazon would really be able to provide to big cities.

Deliveroo really only works in places like London, which are dense and have a customer base who are willing to pay a premium to have their sushi strapped to the basket of a bike and delivered to their door. For a multitude of reasons, that model doesn’t work in Murfreesboro, Tennessee.

The 4-star store is going to sell (mostly) premium goods in premium real estate. It’s more of a marketing tool than anything for Amazon, a place where the company can point and say “look at all these awesome products we sell!” It’s no wonder they opened in SoHo, just like Google opened a pop-up to demo the Pixel and Dreamview in the neighborhood a few years ago.

But what if I live in Murfreesboro?

Well, last-mile delivery and the 4-star store news doesn’t help you much. You can still get two-day Prime shipping, of course, but there’s a small chance you’ll be getting a 4-star store anytime soon.

And last-mile food delivery requires density. It isn’t difficult to drive to your local restaurant to pick up dinner in car-centric Murfreesboro, so why pay someone else do do it? Papa John’s, for example, is partnering with DoorDash to deliver pizzas to rural customers, but there are questions how this would actually work in practice, and how profitable this might be.

But what Deliveroo and the 4-star store do expose is that there is clearly a gap in some of Amazon’s investments for a huge part of its customer base. And this brings up a question: are all these investments from tech companies that transform our physical space and our cities (in the cité sense – the feeling and livability of a city, rather than the ville sense, or the physical structure of the city)? Is there a chance that creates more political animosity toward Amazon and other tech companies?

I think that’s a big risk for Amazon, especially given our tribalized politics and the fact that Amazon and Jeff Bezos sits squarely in the middle of the partisan shit-tossing.

But I also think that beneath the surface, a lot of these investments could benefit suburban or exurban customers more than urban customers.

If you live in Manhattan, it’s easy to walk out the door and buy anything you want, or to have anything you want delivered to you. But this all costs money – a lot of it.

If you live in Murfreesboro, you can have the same goods that you can buy in specialty boutiques in Brooklyn delivered to your door, for free, in two days. That’s incredible for suburban and rural consumers, because it opens them up to the benefits of specialization that were previously only contained in cities. Even if you live in Midtown Manhattan, the market for Prime is gigantic compared to on-demand delivery, so it really doesn’t matter where you live.

Amazon’s $15 an hour minimum wage obviously helps suburban and rural customers the most. The company’s warehouses are largely in these areas, and would bump up the wages even outside of Amazon in those communities. To pay for this, Amazon would likely increase the cost of Prime, which is a direct shift of wealth into these communities with lots of Amazon distribution and logistics jobs.

The point is, the beneficiaries of tech aren’t all that obvious on the surface.  As Tyler Cowen argued in Bloomberg View in 2016, the technological revolution could favor suburban and rural customers the most. That’s worth considering next time you hear a certain resident of the White House engaging in Amazon/Bezos bashing at rallies in suburban or rural communities.

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