Amazon.com Inc. is planning to build a distribution center in Shakopee that will employ 1,000 people and quicken its deliveries in the region.
The online retailer is seeking about $5 million in tax breaks, Shakopee Mayor Brad Tabke said Tuesday. “It is an extraordinary project we are really excited about,” he said.
Amazon plans an 820,000- square-foot building, most of it used as warehouse space, that will open in early 2017, according to a document outlining the company’s tax request. The estimated market value of the facility is $55 million, the document said. Analysts say Amazon often spends about $100 million to build such centers, which it equips with the latest robotics for storing and sorting goods.
The 63-acre site for the proposed facility is south of Hwy. 101 at Shenandoah Road, in an existing industrial park owned by Bloomington-based United Properties. Tabke said the process for considering the tax breaks is just beginning and the Amazon facility would require significant improvements to the existing infrastructure and roads.
United Properties declined to comment and Amazon did not return requests for comment. Tabke said United is still negotiating the land sale with Amazon, but the city document shows the company plans to break ground by June.
The news confirms speculation that Seattle-based Amazon was eyeing a Minnesota expansion, which was triggered when the company began charging sales tax to its online customers in the state last October. The company at the time said it was “considering various opportunities.”
Online retailers that don’t have physical stores don’t have to charge state sales tax unless they have a physical presence or affiliated business in the state.
According to Amazon’s website, it has fulfillment centers in 25 U.S. states. The closest to the Twin Cities is in Kenosha, Wis.
As online shopping has become more popular, many retailers have been looking for ways to deliver packages more quickly to customers’ doorsteps. Many brick-and-mortar companies have been promoting services where shoppers can buy items online and pick them up in a nearby store. But online-only retailers such as Amazon have to depend more on building nearby distribution centers as they look to speed up delivery times.
“Life is getting better if you shop on Amazon,” said Gene Munster, an analyst for Piper Jaffray in Minneapolis.
A distribution center in the region will mean that more items will be available for two-day delivery under the retailer’s Prime membership program, he said. Sunday and same-day delivery will not be far behind. Amazon currently has same-day delivery in about 14 cities.
Meanwhile, Target Corp. also has been testing same-day delivery in Minneapolis and a handful of other cities since last year. Wal-Mart Stores Inc. has dabbled with same-day delivery in the Twin Cities, too.
“For a company as aggressive as Amazon is, it’s shocking how long it’s taken for them to get” to the Twin Cities, Munster added.
While the center will be primarily used for processing shipments, about 70,000 square feet — or 15 percent — will be used for offices.
In the past couple of years, Amazon has been building smaller “sortation centers” that don’t stock products, but where already packaged boxes are sorted to individual post offices in order to get items to customers’ doorsteps faster. The company now has more than a dozen of those typically 300,000-square-foot centers. The plans in Shakopee appear to be more like those of full-blown fulfillment centers, which tend to be around 1 million square feet.
Wal-Mart is opening a 420,000-square-foot food distribution center in Mankato later this year to supply area stores with groceries. That center will employ about 300 workers.
Shakopee, with a population of just over 39,000, made headlines in 2013 by landing a Shutterfly distribution center that employs close to 400 people.
“We’ve been working really hard on economic development in the city. All of these projects are unique and different,” Tabke said. “This is a lot bigger in scope, so it is harder to compare to other projects.”