Amazon’s coming to town

By Katharine Carlon
[email protected]

Economic development officials say an Amazon “last mile” fulfillment center coming to Iowa City’s east side could have implications beyond generating new jobs, repurposing a vacant building and speeding deliveries to Corridor-area Prime customers.

It might also mean a shot at marrying tech innovations from the University of Iowa with the e-commerce giant’s ambitions of dominating the drone delivery space.

“It’s an indication this market is growing, and they see the potential here,” said Mark Nolte, president of the Iowa City Area Development Group, of the Seattle company’s retrofit of a former Procter & Gamble facility for use as a delivery center. “An old building is getting a new life, new jobs are coming … and there is the possibility for interesting partnerships with some of our university organizations.”

Iowa City officials last week confirmed CBJ reporting from over the summer that Amazon planned to lease the 346,000-square-foot building at 2500 Heinz Road for use as a delivery station, one of its smaller-scale fulfillment centers where orders are prepared for local delivery to customers.

The facility is part of Amazon’s aggressive build-out of its global distribution network aimed at providing faster shipping and cutting out third-party couriers like UPS and FedEx. Amazon’s investment also includes testing unmanned vehicles and delivery systems – and that could mean opportunity for the Corridor region, according to Mr. Nolte, who plans to explore the potential of pairing the company with the UI’s National Advanced Driving Simulator (NADS) and its Operator Performance Laboratory (OPL).

NADS, which bills itself as “the world’s most advanced research driving simulator,” conducts safety research for government and industry sponsors, including studies on the use of automated vehicles. OPL, housed at the Iowa City Municipal Airport, researches human-in-the-loop and intelligent autonomous systems to increase the efficiency and safety of aircraft.

“We see possibilities for partnerships piloting drone or autonomous vehicle delivery,” Mr. Nolte said, adding that while no discussions with Amazon officials have yet taken place, he was hopeful they would in the near future. “We’re working our way through our contacts there and trying to find the right people to connect with.”

Synergies between the two UI entities and Amazon are hard to ignore. Amazon announced this summer it would begin piloting delivery by electric drones capable of conveying packages weighing up to five pounds to customers within a 15-mile radius. It also sunk more than $1 billion this year into electric vehicle and self-driving car technology, including $700 million in Tesla competitor Rivian and $530 million in autonomous driving startup Aurora.

With the company seemingly exploring the adoption of automated delivery across its entire supply chain, Mr. Nolte said it only makes sense to bring local assets to the table as the Iowa City center prepares to open.

Iowa City Economic Development Director Wendy Ford said Amazon officials have suggested they might launch operations within the next several weeks, although Mr. Nolte said he believes it will take longer.

“I don’t think they make the holiday rush,” he said, predicting a January or February launch date.

What is certain is that Amazon is hiring. The company is looking for shift assistant and managers, driver trainers and learning coordinators, among other roles, according to its job website. Amazon also planned to host an information session for those interested in working as “Amazon Delivery Service Partners” at MERGE late last week. The partnership calls itself an opportunity “to help entrepreneurs start their own package-delivery businesses in their communities.”

In all, Mr. Nolte said, the company will hire about 20 onsite employees “and sign up as many drivers as they can get.” Ms. Ford said some delivery drivers would work as independent contractors through an Uber-like system, bidding and competing for jobs, though driving roles range from “those kinds of gig jobs to folks driving semis.”

Amazon’s expansion strategy

News of Amazon establishing a foothold on Iowa City comes as it expands its operations elsewhere in the state. It officially confirmed plans last week to open a delivery station in Grimes, according to media reports, and is widely considered to be the company behind a new 780,000-square-foot fulfillment center in Bondurant, although the company has remained mum on that project.

“Amazon is putting these delivery stations anywhere there’s a population large enough to justify one,” said Marcus Wulfraat, president of supply chain and logistics consulting firm MWPVL, which tracks Amazon’s movements closely.

In fact, the company is on a spending tear after announcing free one-day shipping for Prime members earlier this year. In its third-quarter earnings report in late October, Amazon said it had spent over $800 million in each of the last two quarters to build out the infrastructure needed to cut the standard shipping time for Prime customers from two days to one. It expected to spend another $1.5 billion in the fourth quarter.

“They’re just basically plunking these down in every market of 100,000 or more people,” said Mr. Wulfraat, who believes the Iowa City delivery center is likely to serve the Cedar Rapids and Marion areas as well.

Delivery centers typically cover a radius of 50 miles, he said, and are popping up rapidly around the country. As of today, the company operates 157 such facilities, but he expects that number to grow to 350 by the end of next year, “and I don’t really see them stopping there.”

Mr. Nolte said that while Amazon’s arrival is a shot in the arm for the Iowa City area and could lead to unique partnership opportunities down the road, he hoped area residents would continue to shop locally whenever possible.

“It’s great to have something delivered that you can’t find anywhere else, but I think we should be mindful to support our local retailers as much as we can,” he said. CBJ