When the University of Wisconsin Board of Regents approved a five-year contract in August to allow online retail giant Amazon to put a package pickup point on the UW–Madison campus, among the deciding factors were convenience and the minimum of $100,000 per year in commissions the deal would bring to the university. Under the plan, packages with campus ZIP codes would be dropped off at a single pickup site, which is expected to open by spring 2017.
A few local businesses soon voiced opposition.
A Room of One’s Own, a bookstore cofounded by Sandi Torkildson, has been a downtown fixture for decades and is located on Gorham Street, a few blocks from the UW–Madison campus. Torkildson says she’s concerned about the financial impact that an Amazon pickup location could have on her store. A Room of One’s Own sells textbooks for about 50 English and women’s studies courses, though it’s a small portion of her business.
“The advantage we have is being local and being here, having products that the customers want and pick up,” Torkildson says. “Now they’re basically taking the advantage away from us and giving it to Amazon.”
University officials disagree.
“Some of the buy-local advocates have expressed some concern, which, quite honestly, we feel like Amazon has been around the market for a long time, and this isn’t particularly changing the dynamics of business downtown,” says John Lucas, assistant vice chancellor of university communications at UW–Madison.
Colin Murray, executive director at Dane Buy Local, says university officials didn’t involve community members and small business owners in meaningful discussions.
“Maybe there’s a place for this to develop within the university and Amazon together, but it got rushed through without much consideration with how it would affect local businesses and that’s what we’re concerned about,” Murray says.
Since 2015, Amazon has opened pickup points at seven universities, including Purdue University and the University of Texas at Austin. Before the end of 2016, Amazon is expected to open locations at the University of Illinois at Urbana-Champaign and the University of Illinois at Chicago.
By the numbers
(Sources: The Chronicle of Higher Education and Fortune.com)
Amount that Purdue University has made from its three Amazon campus pickup locations (opened in 2015) and a co-branded website (launched in 2014).
Number of universities that have partnered with Amazon for campus pickup locations.
Amount of revenue that bookseller Barnes & Noble reportedly generated from its college sales division in 2014.
Click to buy
Doug Fisher, assistant professor and director for the Center of Supply Chain Management at Marquette University College of Business Administration, answered questions on Amazon’s expansion into universities.
What is Amazon’s strategy in expanding its business?
When [Amazon] first started, it was click to buy, and an item might take a few days to get to you. They didn’t have the advantage of immediate gratification that the traditional retail model had, so they have for years tried to accelerate that lead time from days to next-day and, sometimes, same-day; and to some degree within a few minutes, in some areas.
Why does the company need more delivery centers?
In the world of logistics, you move as much and as large a volume as you can, as close to the market as you can to get costs per mile or costs per unit down as low as you can. The Amazon model messes all that up by sending all these little brown boxes to your doorstep. And that’s an incredibly expensive proposition. It’s called the “last mile.” I think at last count, Amazon is losing about $5 billion per year on the difference they’re paying [for] shipping costs over what they’re bringing in on that [Amazon] Prime program.
Are these types of national contracts becoming more prevalent at the university level?
There is always pressure, and, I think, increasingly so in higher education to not only reduce costs but increase revenues. The UW System is just one example, but I think you could go from state to state and say state budgets are under pressure. State-funded universities are realizing decreasing amounts of their total revenue are from states. [Universities are] having to get it through tuition, alumni donations, research funds and leases and dormitory leases. There is pressure for additional revenue generation than the traditional state-funded university.