Amazon in Australia isn't as great as it sounds

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In mid-June Amazon advertised for a warehouse operations manager, signalling the US online retailer’s plans to set up a fulfilment centre in south-eastern Melbourne as the first step in establishing operations in Australia.

Before we get too excited about the prospect of cheap books dropped at the door by drone, I’d like to run a few numbers.

That $8 you save by buying online would otherwise go part of the way towards paying the wage of a bookseller here in Melbourne.  Photo: Bloomberg

Although I have no idea what Amazon Australia’s pricing structure will be, you can bet their strategy will involve significantly undercutting local booksellers, with free delivery thrown in.

For example, Book Depository (which is now an Amazon front) offers the Man Booker Prize-nominated The Underground Railroad by Colson Whitehead for $11.93 – a saving of about $8 on the retail price of $19.99 at Readings in Carlton. What a bargain – not.

Amazon is coming... Amazon is coming… Photo: RUTH FREMSON

That $8 you save by buying online would otherwise go part of the way towards paying the wage of a bookseller in Melbourne. It pays part of the wage of someone in the Readings warehouse, and someone else in the warehouse of the local distributor.

Melbourne has a strong literary culture – from writing and publishing to bookselling and reading. It’s part of what makes us who we are. Take that $8 out of the book supply chain and you’re taking it out of our city’s culture. Chances are some of those book trade workers are writers themselves, or artists, or students – people busy creating Melbourne’s culture when they aren’t selling books. Amazon executives are not that.

The story is similar all over town. Melbourne still has a lot of great local bookshops – such as Sun Books in Yarraville, Jeffrey’s in Malvern, Avenue in Elsternwick – something many US cities no longer enjoy, thanks in part to Amazon. Local bookshops are part of vibrant high street life. Every time we take $8 out of the local book economy, we threaten that.

But the economic and social effects of Amazon spread beyond the book trade. A report by Civic Economics a US-based consultancy that analyses the impact of business on local communities, found that in 2015, Amazon sold $US55.6 billion worth of goods in that country, while avoiding $US704 million in state and federal sales taxes.

The report says those sales were the equivalent of 39,000 retail store fronts or 133 million square feet (12.4 million square metres) of commercial space, which might have paid $US528 million in property taxes: so a total of more than $US1.2 billion in revenue was lost to state and local governments thanks to Amazon’s activities. That’s $US1.2 billion less to spend on government services – libraries, say, for people who can’t afford to buy books at all, even at Amazon’s discounted prices.

What’s more, the report noted, Amazon cost the US economy 220,000 retail jobs – even counting the jobs created in Amazon warehouses.

Will the story be any different here?

Amazon won’t be able to avoid paying GST on books sold through its Australian operation, but an $11.93 book returns 74¢ less GST than a $19.99 book. Multiply that by however many hundred thousand books Amazon hopes to sell here in a year, and subtract it from the federal budget’s bottom line. Then subtract the knock-on effects of local bookshops being driven out of business.

The old adage holds – you get what you pay for. You can have cheap books selected by an algorithm and delivered by a drone, or you can pay a bit more for a knowledgeable local to hand-sell you something they’ve read and can recommend, part of a vibrant local book culture. I know which I prefer.

Matt Holden is a Fairfax Media columnist.

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