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From Amazon to aluminum: Disruption of old business in Northwest

Customer Kirsty Carey, left, gets ready to swipe her credit card for clerk Marissa Pacchiarotti, as she makes one of the first purchases at the opening day for Amazon Books, the first brick-and-mortar retail store for online retail giant Amazon, Tuesday, Nov. 3, 2015, in Seattle. The company says the Seattle store, coming two decades after it began selling books over the Internet, will be a physical extension of its website, combining the benefits of online and traditional book shopping. Prices at the store will be the same as books sold online.
Customer Kirsty Carey, left, gets ready to swipe her credit card for clerk Marissa Pacchiarotti, as she makes one of the first purchases at the opening day for Amazon Books, the first brick-and-mortar retail store for online retail giant Amazon, Tuesday, Nov. 3, 2015, in Seattle. The company says the Seattle store, coming two decades after it began selling books over the Internet, will be a physical extension of its website, combining the benefits of online and traditional book shopping. Prices at the store will be the same as books sold online. AP

Here is some stuff I know, the “industries in transition” edition:

▪ As both pundit and co-owner of a retail bookstore, I was asked by my former newspaper colleagues who now run regional tech-news website GeekWire to ruminate on the irony of online retailing titan Amazon opening a bricks-and-mortar bookstore in Seattle’s University Village shopping center.

My response focused on the questions of “Is this a threat?” and “Why would they do something like that?” On the first: Competitive threats abound, and this is just one more. It’s one to watch but not one to panic over, because of the physical distance between them and us, and the different business models (the commodity may be the same but the selling strategies and customer bases are different).

Amazon is not likely to follow this store with hundreds more. Why would they? Borders’ disappearance and Barnes & Noble’s struggles illustrate the challenges of the chain-store bookselling model.

Instead this is one more piece of Amazon’s grand strategy of “try everything, throw these ideas at the wall and see what sticks.”

That pattern of experiments and ventures started and abandoned will continue. It’s the sort of thing that drives Amazon’s investors crazy over the money spent with no apparent payoff, not that Jeff Bezos seems to notice.

There’s a method to the madness. Some of those experiments may prove to be successful new lines of businesses, or (in the case of physical locations) new ways of getting product to customers.

Even as they grumble about competing against or dealing with Amazon, publishers and bookstores alike are conducting their own experiments, playing around with new models such as pop-up stores and satellite locations. That’s what companies and industries do if they want to endure. Why wouldn’t Amazon do the same — even if some of us would prefer that they go disrupt someone else’s business for a while?

▪ And then there were none — operating aluminum smelters in the Pacific Northwest, that is.

Aluminum production used to be something of a big deal around here, including in Tacoma, where Kaiser Aluminum operated a smelter.

The Tacoma smelter was built by the federal government during World War II, according to History Link. Kaiser bought it after the war and ran it from 1947 to 2000.

But that smelter is not just closed but gone. Also closed is Kaiser’s Spokane-area smelter (it still operates a rolling mill there). Also closed are smelters in Longview, Goldendale, Vancouver, The Dalles and Troutdale, Oregon, and Columbia Falls, Montana.

The latest to go are Alcoa’s Intalco smelter operation in Ferndale and its smelter near Wenatchee. A casthouse at Intalco will continue to operate.

Alcoa says the Washington smelters have been “idled,” but it also notes that with its latest decisions the company “will have closed, divested or curtailed 45 percent of total smelting operating capacity since 2007.”

Aluminum became a major industry in the Northwest because of the presence of a crucial raw material — cheap, abundant power. It takes a lot of juice to make aluminum, in such amounts that the metal became known in this region as “congealed electricity.” The smelters generated a lot of good-paying manufacturing jobs, not to mention some prolonged and contentious fights over electricity pricing and allocation.

But an analysis by the Northwest Power & Conservation Council warned that “there is little optimism that the smelters ever will resume full production. Low-cost electricity lured the aluminum companies to the Northwest in the 1940s and 1950s; increased prices for raw materials, volatile electricity prices, and worldwide competition with other, often lower-cost production and supply, eventually drove them out of business.”

That was written in 2008, and now it looks as though there won’t be any smelters left at all — with one exception. If you include British Columbia in the definition of Pacific Northwest, then you can count Rio Tinto Alcan’s operation in Kitimat, going through a major modernization project.

You’re not likely to see a similar infusion of capital in U.S. smelting capacity. The electric-utility industry as a whole won’t miss the aluminum industry — the decline has been gradual, and there’s enough demand from sectors such as server farms to pick up the slack. The jobs lost are a different matter, not just because of the number and their wages and benefits but where they’re located, in communities with relatively smaller employment bases.

Some industries survive radical transformation — forest products for example, even bookselling. You’d have to be the sunniest of optimists, however, to believe the story of the Northwest aluminum industry has a happier chapter yet to be written about it.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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