Amazon tightening grip on US community contracts
11 July 2018
Local OP suppliers feeling heat from online giant.
An increasing number of government departments, local schools and community groups in the US are signing up to buy office supplies directly from Amazon, according to a newly-released report
According to 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.
The Washington Post reports that the city of Atlanta, Denver public schools and the Arizona police department are among the 1500 public organisations that have signed new contracts to buy office supplies from Amazon,
The local deals are part of a larger contract Amazon signed in January 2017 with US 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 valued at US$500 million a year. The US 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.
“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.
More than half of Amazon’s sales 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 overpaying for basic supplies.
Guernsey Office Supplies, an office products company in Virginia, 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 with 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 US$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 US Communities.