Why is Ama­zon’s same-day ser­vice skip­ping many largely black ZIP codes?

An anal­y­sis of the ZIP codes el­i­gi­ble for Ama­zon.com’s pre­mium, same-day de­liv­ery ser­vice reveals that the com­pany doesn’t serve black neigh­bor­hoods in sev­eral ma­jor U.S. cities as well as it does white ones.

Bloomberg Businessweek (Asia) - - CONTENTS - By David In­gold and Spencer Soper

For res­i­dents of mi­nor­ity ur­ban neigh­bor­hoods, ac­cess to Ama­zon .com’s vast ar­ray of prod­ucts—from Dawn dish soap and Hug­gies di­a­pers to Sam­sung flatscreen TVs—can be a god­send. Un­like whiter ZIP codes, th­ese parts of town of­ten lack well­stocked stores and qual­ity su­per­mar­kets. White ar­eas get or­ganic gro­cers and de­signer bou­tiques. Black ones get min­i­marts and dol­lar stores. Peo­ple in neigh­bor­hoods that re­tail­ers avoid must travel far­ther and some­times pay more to ob­tain house­hold ne­ces­si­ties. “I don’t have a car, so I love to have stuff de­liv­ered,” says Ta­mara Ras­berry, a hu­man re­sources pro­fes­sional in Wash­ing­ton, D.C., who spends about $2,000 a year on Ama­zon Prime, the on­line re­tailer’s pre­mium ser­vice that guar­an­tees two-day de­liv­ery of tens of mil­lions of items (along with dig­i­tal mu­sic, e-books, stream­ing movies, and TV shows) for a yearly $99 mem­ber­ship fee. Ras­berry, whose neigh­bor­hood of Congress Heights is more than 90 per­cent black, says shop­ping on Ama­zon lets her by­pass the poor se­lec­tion and high prices of nearby shops.

As Ama­zon has ex­panded rapidly to be­come “the every­thing store,” it’s of­fered the prom­ise of an egal­i­tar­ian shop­ping ex­pe­ri­ence. On Ama­zon and other on­line re­tail­ers, a black cus­tomer isn’t viewed with sus­pi­cion, much less fol­lowed around by store se­cu­rity. Most of Ama­zon’s ser­vices are avail­able to al­most ev­ery ad­dress in the U.S. “We don’t know what you look like when you come into our store, which is vastly dif­fer­ent than phys­i­cal re­tail,” says Craig Ber­man, Ama­zon’s vice pres­i­dent for global com­mu­ni­ca­tions. “We are ridicu­lously pride­ful about that. We of­fer ev­ery cus­tomer the same price. It doesn’t mat­ter where you live.”

Yet as Ama­zon rolls out its up­grade to the Prime ser­vice, Prime Free Same-Day De­liv­ery, that prom­ise is prov­ing harder to de­liver on. The am­bi­tious goal of Prime Free Same-Day is to elim­i­nate one of the last ad­van­tages lo­cal re­tail­ers have over the e-com­merce gi­ant: instant grat­i­fi­ca­tion. In cities where the ser­vice is avail­able, Ama­zon of­fers Prime mem­bers same­day de­liv­ery of more than a mil­lion prod­ucts for no ex­tra fee on or­ders over $35. Eleven months af­ter it

started, the ser­vice in­cludes 27 metropoli­tan ar­eas. In most of them, it pro­vides broad cov­er­age within the city lim­its.

In six ma­jor cities where it op­er­ates, how­ever, the same-day ser­vice area ex­cludes pre­dom­i­nantly black ZIP codes to vary­ing de­grees, ac­cord­ing to a Bloomberg anal­y­sis that com­pared Ama­zon same-day de­liv­ery ar­eas with U.S. Cen­sus Bureau data. In At­lanta, Chicago, Dal­las, and Wash­ing­ton, cities still strug­gling to over­come gen­er­a­tions of racial seg­re­ga­tion and eco­nomic inequal­ity, black citizens are about half as likely to live in neigh­bor­hoods with ac­cess to Ama­zon same-day de­liv­ery as white res­i­dents.

The dis­par­ity in two other big cities is sig­nif­i­cant, too. In New York, same-day de­liv­ery is avail­able through­out Man­hat­tan, Staten Is­land, and Brook­lyn, but not in the Bronx and some ma­jor­ity-black neigh­bor­hoods in Queens. In some cities, Ama­zon same-day de­liv­ery ex­tends many miles into the sur­round­ing suburbs but isn’t avail­able in some ZIP codes within the city lim­its.

The most strik­ing gap in Ama­zon’s same­day ser­vice is in Bos­ton, where three ZIP codes en­com­pass­ing the pri­mar­ily black neigh­bor­hood of Roxbury are ex­cluded from same-day ser­vice, while the neigh­bor­hoods that sur­round it on all sides are el­i­gi­ble. “Be­ing sin­gled out like that and not get­ting those same ser­vices as they do in a 15-minute walk from here is very frus­trat­ing,” says Roxbury res­i­dent JD Nel­son, who’s been an Ama­zon Prime mem­ber for three years. “It’s not a good thing, and it def­i­nitely doesn’t make me happy.” Ras­berry was ex­cited when Ama­zon an­nounced Prime Free Same-Day was com­ing to Wash­ing­ton. But when she en­tered her ZIP code on the re­tailer’s web­site, she was dis­ap­pointed to find her neigh­bor­hood was left out. “I still get two-day ship­ping, but none of the su­per­fast, con­ve­nient de­liv­ery ser­vices come here,” she says. Ras­berry pays the same $99 Prime mem­ber­ship fee as peo­ple who live in the city’s ma­jor­ity-white neigh­bor­hoods, but she doesn’t get the same ben­e­fits. “If you bring that ser­vice to the city,” she says, “you should of­fer it to the whole city.”

There’s no ev­i­dence that Ama­zon makes de­ci­sions on where to de­liver based on race. Ber­man says the eth­nic com­po­si­tion of neigh­bor­hoods isn’t part of the data Ama­zon ex­am­ines when draw­ing up its maps. “When it comes to same-day de­liv­ery, our goal is to serve as many peo­ple as we can, which we’ve proven in places like Los An­ge­les, Seat­tle, San Fran­cisco, and Philadel­phia.” Ama­zon, he says, has a “rad­i­cal sen­si­tiv­ity” to any sug­ges­tion that neigh­bor­hoods are be­ing sin­gled out by race. “De­mo­graph­ics play no role in it. Zero.”

Ama­zon says its plan is to fo­cus its same-day ser­vice on ZIP codes where there’s a high con­cen­tra­tion of Prime mem­bers, and then ex­pand the of­fer­ing to fill in the gaps over time. “If you ever look at a map of ser­vice

for Ama­zon, it will start out small and end up get­ting big,” he says.

This is a log­i­cal ap­proach from a cost and ef­fi­ciency per­spec­tive: Give ar­eas with the most ex­ist­ing pay­ing mem­bers pri­or­ity ac­cess to a new prod­uct. Yet in cities where most of those pay­ing mem­bers are con­cen­trated in pre­dom­i­nantly white parts of town, a solely data-driven cal­cu­la­tion that looks at num­bers in­stead of peo­ple can re­in­force lon­gen­trenched inequal­ity in ac­cess to re­tail ser­vices. For peo­ple who live in black neigh­bor­hoods not served by Ama­zon, the fact that it’s not de­lib­er­ate doesn’t make much prac­ti­cal dif­fer­ence. “They are of­fer­ing dif­fer­ent ser­vices to other peo­ple who don’t look like you but live in the same city,” says Ras­berry.

Ama­zon cites sev­eral rea­sons a ZIP code within a city may be ex­cluded: too few Prime mem­bers to jus­tify the ex­pense of send­ing out trucks and driv­ers, or the area is too far from the clos­est Ama­zon ware­house. “Dis­tance mat­ters,” Ber­man says. “At some point, with the math in­volved, we can’t make it work— in time, or in cost for the car­rier. There is a di­min­ish­ing re­turn on or­ders.” In some cases, Ama­zon says, it’s dif­fi­cult to find de­liv­ery part­ners will­ing to serve the area. “We de­liver same day up till 9 p.m.” says Ama­zon spokesman Scott Stanzel. “There are a lot of car­rier part­ners. A lot of vari­ables.”

Ama­zon won’t re­veal specifics about how it de­cides its same-day de­liv­ery ar­eas—the com­pe­ti­tion would kill for that info, says Ber­man. Broadly speak­ing, it comes down to cost. Same-day de­liv­ery is ex­pen­sive to pro­vide, in part be­cause Ama­zon can’t rely on the built-in in­fras­truc­ture and low ne­go­ti­ated rates of United Par­cel Ser­vice and the U.S. Postal Ser­vice, which shoul­der the re­tailer’s stan­dard and two-day Prime de­liv­er­ies. To get pack­ages out within hours, Ama­zon uses a mix of its own driv­ers, lo­cal couri­ers, and in­de­pen­dent con­trac­tors mak­ing de­liv­er­ies in their own ve­hi­cles through an Uber­like ser­vice called Ama­zon Flex.

Cities where Ama­zon of­fers broad one-day cov­er­age ap­pear to have some­thing in com­mon: close prox­im­ity to prod­uct ware­houses, mak­ing it less ex­pen­sive to reach all ar­eas. “It’s not the only vari­able. It’s cer­tainly one of them,” says Ber­man. “It def­i­nitely has an im­pact if we have a ful­fill­ment cen­ter that’s out­side a city, or we have a ful­fill­ment cen­ter that hap­pens to be on one side of it.” Ama­zon de­clined to re­veal the lo­ca­tions of its same-day hubs, so it’s dif­fi­cult to tell how that works.

Ama­zon has a “rad­i­cal sen­si­tiv­ity” to any sug­ges­tion that neigh­bor­hoods are be­ing sin­gled out by race

In same-day cities Ama­zon hasn’t yet sur­rounded with ware­houses, the com­pany must de­cide which neigh­bor­hoods are worth the cost of ser­vice and which aren’t. That’s where things get com­pli­cated.

Some ex­cluded ZIP codes cor­re­spond with higher crime rates. Ama­zon won’t say whether con­cerns about stolen pack­ages or the safety of driv­ers fig­ure into its de­ci­sions about where to de­liver, say­ing only “the safety of our em­ploy­ees is a top pri­or­ity.”

In­come inequal­ity may also play a part. Many ex­cluded ar­eas have av­er­age house­hold in­comes be­low the na­tional av­er­age. And house­holds with Prime mem­ber­ships skew wealth­ier—not sur­pris­ing given the $99 mem­ber­ship fee. An April study of fam­i­lies with teenagers by in­vest­ment bank Piper Jaf­fray es­ti­mates 70 per­cent of such U.S. house­holds with in­comes of $112,000 per year or more now have a Prime mem­ber­ship, com­pared with 43 per­cent for house­holds with in­comes of $21,000 to $41,000.

In­come dif­fer­ences alone don’t ex­plain the gaps in ser­vice, how­ever. In Chicago, New York, Bos­ton, At­lanta, and other cities, some ar­eas that are ex­cluded have house­hold in­comes as high or higher than ZIP codes Ama­zon does cover.

Ber­man points to cities where some black ZIP codes get same-day ser­vice and some white ones don’t. In Los An­ge­les, black and His­panic com­mu­ni­ties south of down­town have same-day ser­vice, but mostly white Mal­ibu, on the far side of the traf­fic-clogged Route 27 and Pa­cific Coast High­way, doesn’t. Over­all, though, in cities where same­day ser­vice doesn’t ex­tend to most res­i­dents, those left out are dis­pro­por­tion­ately black. (In the six cities with dis­par­i­ties, Asians, on av­er­age, are as likely as whites to live in an area with cov­er­age; His­pan­ics are less likely than whites to live in same-day ZIP codes, but more likely than blacks.)

“As soon as you try to rep­re­sent some­thing as com­plex as a neigh­bor­hood with a spread­sheet based on a few vari­ables, you’ve made some gen­er­al­iza­tions and as­sump­tions that may not be true, and they may not af­fect all peo­ple equally,” says Sorelle Friedler, a com­puter sci­ence pro­fes­sor at Haver­ford Col­lege who stud­ies data bias. “There is so much sys­temic bias with re­spect to race. If you aren’t pur­pose­fully try­ing to iden­tify it and cor­rect it, this bias is likely to creep into your out­comes.”

Ama­zon says it’s mis­lead­ing to scru­ti­nize its cur­rent de­liv­ery ar­eas so closely, be­cause the ser­vice is new and evolv­ing. Even­tu­ally, cov­er­age will ex­tend to ev­ery ZIP code in same-day cities, says Ber­man. The ser­vice is in­deed ex­pand­ing. Since Bloomberg first con­tacted Ama­zon for this ar­ti­cle in Fe­bru­ary, the com­pany an­nounced 12 new same-day cities. As it adds lo­ca­tions, how­ever, Ama­zon has yet to ex­tend cov­er­age to ex­cluded ma­jor­ity-black ZIP codes in the ex­ist­ing cities with gaps in ser­vice. How long will those cus­tomers have to wait to get the full ben­e­fits of their Prime mem­ber­ship? Ber­man says there’s no set timetable: “We’ll get there.”

Juan Gil­bert, chair of the Univer­sity of Florida’s de­part­ment of com­puter and in­for­ma­tion sci­ence & engi­neer­ing, says Ama­zon has an op­por­tu­nity to use its data re­sources to cor­rect its over­sight and avert fall­ing into the re­tail pat­terns of the past. “I think it was a mis­take, and it never crossed their mind,” he says. “This is a per­fect ex­am­ple of how Ama­zon had a blind spot.” <BW>

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