Jumping to Amazon’s Tune

Linda Stewart | 26 Oct 2017 | US Perspective

The deadline has come and gone – and Amazon has revealed that 238 regions are in the running to become the location for the new Amazon second headquarters.

Amazon Headquarters, Seattle

The process has become a bidding war like nothing we’ve ever witnessed before, with cities across the US, Canada and Mexico throwing everything at a high-stakes battle. Up for grabs is a promised investment by Amazon of $5 billion and a headquarters that would host 50,000 workers making an average of more than $100,000 a year.

Amazon had outlined the usual kind of wish list – a large population centre with high quality of life, educated labour force and access to airport, road and mass transit infrastructure.

But it also called for a business-friendly environment and tax structure and incentives to be offered by local communities to offset initial capital outlay and ongoing operational costs, including tax abatements, land grants, workforce training funds, sales tax exemptions, permitting waivers or fee reductions. And the result has been quite the circus. The city council of Stonecrest, Georgia, voted to de-annex 345 acres of land and officially rename the property Amazon.

Sun Corridor, the economic development group in Tucson, Arizona, sent a 21-foot saguaro cactus to Amazon’s Seattle base – but the massive plant was donated to the arizona-Sonora Desert Museum by Amazon, which said it couldn’t accept gifts.

New York lit the Empire State Building up in orange to match the company’s smile logo and offered $7 billion in tax benefits. One developer in Irvine, California, offered to pay the entire $5 billion in construction costs himself.

Things even got somewhat ugly between competing regions, with New Hampshire slating nearby Boston over its traffic congestion.

“Choose Boston and next year when you leave your tiny $4,000-a-month apartment only to sit in two hours of traffic trying to make your way to an overburdened airport, you’ll be wishing you were in New Hampshire,” officials from New Hampshire told Amazon in their pitch.

Amazon has come under a certain amount of fire for “shaking down” communities that are desperate to win the jobs and prestige of hosting the second headquarters.

But there’s no doubt economic development agencies across North America have really been forced to up their game.

For far too long, many EDOs have just kept on delivering the same old pitch using the same old promotional materials that have been mouldering in the stationery cupboard – and this ‘beauty parade’ process by Amazon has forced them to take a much more commerical approach.

At OCO Global, we’ve been warning EDOs that they need to adopt a much more tailored approach to the company they are targeting. They need to look at what the company wants and needs before putting together a fresh and exciting pitch that addresses those desires. In short, they need to behave like a company tendering to supply a service.

It has been a canny move by Amazon to garner the best incentives it can by forcing EDOs across North America to behave like suppliers, and the result for the company will be a better return on investment while EDOs line up to deliver due diligence.

But there are dangers on both sides to this approach – dangers to the EDOs who could find all their hard work and spending has brought them a burden instead of an asset and the dangers to Amazon itself which could be tempted to cut corners as it allows EDOs to do its job for it.

However, it wouldn’t hurt for EDOs to learn from this experience – there is no doubt that other international corporations will have been taking notes and may be tempted to emulate Amazon when the next megadeal comes around.