Oct 1, 2014 5:03 PM

Amazon closing distribution plant in Kansas

The Associated Press

WICHITA, Kan. (AP) Amazon.com plans to close a distribution center in southeast Kansas in February, a move that will affect hundreds of workers in this rural area, the online retailer said Wednesday.

The Seattle-based company said it regularly evaluates its network to ensure the business is placing fulfillment centers as close to customers as possible.

"This is not a decision we made lightly and we are committed to supporting our employees through this transition," Amazon spokeswoman Ashley Robinson said in an email.

Amazon said it employs hundreds of workers in Coffeyville, but gave no specific numbers. Employees were notified Tuesday afternoon.

Wedbush Securities analyst Michael Pachter said the retailer has reached deals with California, Texas, Pennsylvania and New York in which it would receive a holiday for a limited period of time on collection of sales taxes in exchange for building distribution centers and employing people in those states. They are among the most populous states in the country.

Another factor behind the move to the more populous states is Amazon's Prime service, which offers a guaranteed two-day delivery, Pachter said. The company was finding it inconvenient to ship to out-of-the-way distribution centers in places such as Kansas and then transport those packages hundreds of miles to the customers, he said.

Having a distribution center in Kansas was beneficial when the company was trying to avoid collecting sales taxes in those more populous states. But now that it has tax deals with those states, it is setting up centers closer to customers, which will save time and money for shipping.

"Locating a distribution center in Kansas didn't make sense from a business perspective because you have a low population, but it made sense from a tax perspective," Pachter said. "Once you neutralize the tax law, they didn't need to be there anymore that is what happened."

Coffeyville is a rural Kansas town about 70 miles north of Tulsa, Oklahoma. Amazon is one of the area's largest employers, though its workforce fluctuates widely.

"Obviously losing a large employer like that will definitely impact our entire area," Coffeyville Chamber of Commerce executive director Stacia Meek said.

The Parsons Sun first reported the closure plans and noted the company recently celebrated its 15th year anniversary in Coffeyville.

"I would say on balance that Amazon is still investing aggressively in its businesses, so I would assume that closing fulfillment centers like Coffeyville are the exception, as they add significant new capacity elsewhere," R.W. Baird analyst Colin Sebastian said in an email.

Amazon can save a lot of money on shipping expenses and improve service with fulfillment centers that are closer to places with larger populations, he said.


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