Amazon expanding beyond Seattle with corporate operations, not everyone approves

by Kim Souza (ksouza@talkbusiness.net) 412 views 

Amazon CEO Jeff Bezos said Thursday (Sept. 7) the retail giant has plans for a second headquarters that will employ about 50,000 workers. He dubbed the project “HQ2” and said it will cost about $5 billion to build and operate.

He was clear HQ2 would not be a satellite operation but a true second home office equipped with its own executive teams and senior leadership. Bezos also said employees at HQ1 would have the possibility to transfer to the new HQ2 location once it’s operational.

“We expect HQ2 to be a full equal to our Seattle headquarters,” he said.

The company said it’s searching for the right city for this expansion and posted a request for proposal online Thursday, with incentives to offset construction and operating costs to be significant factors in where HQ2 will land.

Cities across the country will no doubt court Amazon to their metros but insiders believe the second location will need to be located within Amazon’s present logistics and delivery system which uses its own growth fleet of cargo planes and fulfillment centers.

Amazon said it will prioritize metropolitan areas larger than one million people which leaves Arkansas out of the picture. But with a large presence in in the Northwest, it seems a more centralized location such as Kansas City or Dallas could make sense. Or, possibly a more eastern location like Atlanta could be in the running. Amazon’s recent acquisition of Whole Foods already gives it a corporate presence in Austin, Texas, which would likely fit all the site requirements in the proposal.

The new site must be a “stable and business-friendly environment” with the potential to attract and retain strong technical talent, Amazon states in its proposal guidelines.

It’s uncommon for corporations to have dual headquarters, but Amazon has a reputation for pursuing alternative ideas, according to Annibal Sodero, assistant professor of supply chain at the University of Arkansas, who said the company continues to push toward market domination.

Wal-Mart operates a headquarters in San Bruno, Calif., for its U.S. e-commerce business but Bentonville is considered the home base for Wal-Mart Stores. With all the recent e-commerce acquisitions Wal-Mart expanded its corporate operations to include Hoboken, N.J., San Francisco and New York City for its e-commerce subsidiaries.

While a second headquarters would be good news for the city or metro to win the bid, not everyone is excited about this Amazon expansion.

This is Amazon’s latest attempt to finance its growth through public subsidies, said Stacy Mitchell, co-director of the Institute for Local Self-Reliance. Mitchell explained over the last decade Amazon has mastered this strategy.

“It’s come to employ site location experts and lobbyists in its efforts to pit local and state governments against each other for the largest subsidy package. It’s a strategy that’s paid off for the company,” she said.

Between 2005 and 2014 Mitchell’s group found 50% of Amazon’s new fulfillment centers received incentives totaling $613 million. She said Amazon received another $147 million in subsidies connected to its data centers during these years.

“Additional incentives provided by governments since 2014 have driven the total value of public handouts that Amazon has received to well over $1 billion, according to data compiled by Good Jobs First,” she said.

Mitchell said the deals are in addition to generous tax loopholes Amazon has exploited to gain financial advantage over brick-and-mortar competitors, especially independent retailers.

“Our analysis finds that as Amazon grows, it’s in fact destroying far more jobs than it’s creating. It’s also beginning to threaten the revenue streams on which local governments rely, as shuttered stores depress commercial property tax values. In response to Amazon’s HQ2 RFP, public officials would do well to invest in smart economic development for their communities instead of engaging in Amazon’s arms race,” Mitchell said.

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