Ulta Beauty may be the biggest beauty product supplier in the country, but the announcement the company will build a distribution and fulfillment center in Fresno could be about much more than eyeliner and lipstick. Some experts think the Central Valley could develop into the hub that supplies on demand products for the entire west coast. But why is the area so enticing for internet retailers, and do these centers provide good jobs?
In the bathroom of her central Fresno home, Roe Borunda looks through tote after tote filled with all manner of makeup.
Borunda opens a new tote and explains what is inside, “Next one in is powders and contouring kits”.
And Roe loves Ulta Beauty products, she is literally a card-carrying fan. She has an Ulta credit card.
“[Reporter: And all of this is from Ulta?] About 90% from Ulta,” Borunda says.
She says she fell in love with the store and the makeup when a shop opened in Fresno, and now she shops only at Ulta.
“It was like a candy store of make-up. And you had so many different selections. You had everything from low-cost cosmetics to shampoos and nail polishes. A salon in the back. And you had your higher end cosmetics. And it was kind of like a one-stop shop for the make-up,” Borunda says.
It’s people like Roe that have economic development officials in the valley giddy.
The company recently announced that they would build a new distribution and internet fulfillment center in south Fresno. It will serve both the company’s online shoppers and Ulta’s traditional retail stores. Kern County and Visalia also lobbied to land the facility.
City of Fresno Economic Development Director Larry Westerlund says these facilities aren’t your dad’s warehouse jobs with a few men in a cavernous warehouse, these facilities employ a huge workforce.
“With the internet fulfillment [centers] what we are seeing with the automated fulfillment is much higher numbers of people are required. They are much more efficient and they get a lot more packages much more quickly. But much more numbers [of people],” Westerlund says.
In the case of Ulta, they could use as many as 1,000 employees during their peak season.
Westerlund says Amazon is also considering building a fulfillment center right next door and could employ 2,000 people or more.
The employment numbers are so much higher because instead of one worker at a traditional warehouse moving boxes full of product for a retail store, a fulfillment center has an army of workers seeking out a specific individual product for online shoppers. Salaries also routinely run ahead of the minimum wage.
But Richard Chapman with the Kern Economic Development Corporation says because of the increasing reliance on technology in distribution and fulfillment centers are not simple or dead-end jobs, but highly technical careers.
“The old paradigm is that you would put boxes on a conveyor belt. Now, you are programming the conveyor belt,” Chapman says.
Kern County already has up to 50 distribution centers, headlined by big companies like Ikea and Target.
Demand is so high that Chapman says Bakersfield College has established a bachelor’s degree in industrial automation.
So the combination of upward mobility and a solid salary makes distribution and fulfillment centers highly sought after by people like Chapman and Westerlund.
There are a number of reasons why the Central Valley is so attractive.
The valley has strong connections to transportation infrastructure like ports, highways, and railroads. And despite not being in a major population center, is within reasonable range of LA, San Francisco, and even Portland or Seattle to capitalize on Amazon’s model of low cost and fast delivery.
Westerlund says another big key is the availability of land to build the massive structures.
“You are talking about $125,000 an acre. In Southern California and the Inland Empire, its $550,000 to $600,000 an acre. And when you are talking 72 acres that ends up adding pretty quickly,” Westerlund says.
The City of Fresno also offered a tax incentive package to draw Ulta, totaling about $18 million over 30 years. But even with that, the company is expected to add $42 million to city coffers.
But Westerlund says the incentives are only half the picture, as towns must stay ahead of the curve installing infrastructure like wide roads, sewers, and water to keep the economic momentum going.
And that momentum could be the result of regional fragmentation of logistics according to Donald Pettit who helps companies scout locations for distribution and fulfillment centers.
He echoes the reasons why the Central Valley is attractive and says similar stories are playing in other parts of the country, leading to a kind of regional hub and spoke distribution system.
“We are seeing similar pieces in Pennsylvania. We are seeing similar pieces in Texas. So there is a question of ‘are their regional hubs? And what is the advantage of having them?’ I think you can see that with air travel. So, yes, there are definitely regional hubs. And there some spillover effects for those hubs that make them more attractive,” Pettit says.
Spillovers like attracting other companies and secondary economic activity in the local economy from the workers.
And speaking of workers, Pettit also says the Central Valley’s relatively high unemployment rate means there is a workforce in place ready to step up and take the jobs distribution and fulfillment centers provide.
Ulta expects to be operating its Fresno warehouse by next summer.
All our make-up aficionado Roe wants to know is…’does that mean my make-up will get here faster?’