Don Cunningham

This column, written by LVEDC President and CEO Don Cunningham, originally appeared in Lehigh Valley Business on May 23, 2016. (Click here to read Cunningham’s previous columns.)

There are times at the ocean side when a wave seems to appear from nowhere.

It’s a bit odd considering the ocean’s edge is a constant roll of waves, water in and water out. Yet, most of us have experienced being knocked off our feet by a wall of water that often elicits a yell of,  “I didn’t see that coming.”

E-commerce and its corollary of logistic and distribution centers, warehouses, and transportation hubs has been one of those waves. The Lehigh Valley and Berks County, the unsuspecting bather, picking itself off the shore bottom gasping, “I didn’t see that coming.”

Quickly the Internet, the laptop, and the smartphone changed retail. It started with ordering CDs or books online and overnight became everything from toothpaste to Toyotas. Retail changed forever.

And retail drives the American economy. We are a consumption-based society. Disposable income and purchasing drives growth and growth drives everything else, stock prices, pension funds, job creation, and tax-base generation.

Recent online retail reports show a growth of about 15 percent a year. Traditional brick-and-mortar retail grows only 1-2 percent a year. If you take out the large discount retailers like Target, Sam’s Club, and specialty grocers like Whole Foods, there is no growth in traditional retail.

The job of the shop clerk has become the job of the parcel delivery person.

The Lehigh Valley and Berks County have found themselves at ground zero of this retail revolution. The name of the game is to deliver your parcel as quickly as possible. You click your mouse a few times in the evening, punch in your credit card number, and the race is on to have the package at your doorstep as quickly as possible.

It’s not magic, however, that delivers your package.  An entire, relatively new, back economy goes to work once you complete your order. If you live on the East Coast, there’s a good chance it’s based in the Lehigh Valley and Berks County, which is one of the top three e-commerce hubs in the Eastern United States.

Why? Available land, available workers, quick access to the entire eastern seaboard, good road and rail access and lower costs than nearby major metropolitan areas. Translation: a seemingly endless stream of online retailers locating large, sometimes very large, facilities here: Amazon, Walmart, zulily, Stitch Fix, Primark, Petsmart, Target, and nearly every other major retailer, often leasing space in third party logistic centers.  Those are companies contracted to operate warehouse, distribution, and logistic facilities for every imaginable product.

This new wave of activity has done two primary things, one good and one not so good. It’s created jobs, lots of jobs, primarily for low-skilled workers. Today, there are about 25,000 people working in the logistics sector; that’s as many as once worked at Bethlehem Steel. Although the jobs aren’t as good, wages have increased as new companies have arrived, creating a greater demand for workers. Average wages are now $16-17 per hour and climbing.

The downside is trucks, trucks, trucks, and more trucks. It takes trucks to move products. And the secondary road network of the Lehigh Valley was not ready for the wave. The development tail has wagged the dog of public infrastructure planning.

Local government officials now wrestle with land use decisions, road widening projects, and angry residents who don’t want to share the road with large trucks. Tax base gains need to be poured into road – and freight rail – projects.

Like all waves that wash ashore, they typically bring something with them. As the Lehigh Valley has emerged as an East Coast e-commerce hub, manufacturers, and food and beverage producers have found it’s also a good place to make products.

Contrary to conventional wisdom, more people work in manufacturing in the Lehigh Valley than in logistics. There are 677 manufacturers here employing about 32,000 people. Our manufacturing GDP is nearly $5 billion a year, compared to about $1.5 billion for logistics and e-commerce.  Many of those big box buildings in industrial parks are not just warehouses and logistics facilities, there are products being made there.

So, as we pick ourselves up from the ocean bottom, we need to adjust our swimming trunks, brush the sand from our hair and continue to enjoy the ocean – and the beautiful sea shells – because the waves aren’t going away.