Amazon President, Chairman and CEO Jeff Bezos speaks at the Business Insider's "Ignition Future of Digital" conference in New York City December 2, 2014. REUTERS/Mike Segar
Since June, when Amazon.com agreed to buy Whole Foods Market, Kroger, the largest publicly traded U.S. supermarket chain, has seen nearly $8 billion of its market value disappear. That is a testament to the Shiva-like force the e-commerce pioneer led by Jeff Bezos can unleash, threatening to destroy swaths of the retail landscape and many of its jobs.
But here’s another figure to consider. Over the past 10 calendar years, as Amazon grew from $15 billion in revenue to almost $100 billion, it paid just two-thirds of the taxes that Kroger did. The supermarket chain doled out $7.2 billion to federal, state and local governments compared to Amazon’s $4.5 billion, according to annual reports.
That could be one foundation for public and government resentment against the $550 billion e-commerce giant. But Bezos’ search for a second headquarters for Amazon gives the company a chance to forestall that kind of backlash by setting up – and investing heavily – where it’s needed most.
The company’s request for proposals for a second North American head office, in which it expects to invest $5 billion and to create as many as 50,000 high-paying jobs, is one route to some kind of redemption. Amazon received 238 proposals from 54 states, provinces, districts and territories by the Oct. 19 deadline. It says its final choice will come in 2018, kicking off with a $600 million project to create 1 million square feet of office space.
No matter who wins, the competition has already had a beneficial impact. It has forced municipal and state leaders, local development agencies, businesses and nonprofits to work together, assess their strengths and weaknesses, take a fresh look at infrastructure and pool their resources. Even though only one city will win Amazon’s office park, they should all now be better able entice other enterprises.
But Amazon has the chance to do more than just whip North American cities into a frenzy of tax rebates, sewer permits and land giveaways. Bezos’ company could transform a place that might otherwise be struggling into an information-technology hub of the future – affecting millions of lives for the better, and creating new customers for its services, along the way.
“The big question for Amazon is whether they want to go to some place that is already an eight and help it get to 10,” John Strangfeld, the chairman and chief executive of Prudential Financial, told me recently. “Or they can choose a place that needs help, that may be a four today and could become an eight over time with Amazon’s help. It’s potentially a huge opportunity for Amazon.”
Strangfeld knows. Prudential is often lobbied to leave Newark, the city where the insurer and asset manager was founded in 1875 as The Widows and Orphans Friendly Society. Two years ago Prudential instead doubled to $1 billion its commitment to impact investing, with a big slug of that devoted to its New Jersey hometown. Among projects Prudential helped support in Newark has been the redevelopment of the historic Hahne & Co department-store building – now home to one of Amazon’s Whole Foods stores.
Newark isn’t alone among municipalities that might be considered in need of a boost. Detroit has also made a pitch. “We are small-business savvy and billion-dollar business bold,” its promotional video to Amazon claims. Those hawking the Motor City’s charms include Dan Gilbert, the Quicken Loans founder whose own investments helped revitalize a once-moribund downtown.
“By reinvigorating the American industrial heartland and going into Detroit, (Amazon) would add real social value,” says Scott Galloway, a marketing professor at New York University’s Stern business school and author of “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.” He predicts a widespread political and social response to the rising power of the largest technology enterprises.
He may be right. While Amazon’s investors are patient, accepting Bezos’ strategy of diverting much of the money the group makes into other ventures, like web hosting and online entertainment, legislators and regular people, cognizant of the behemoth’s power to put people in traditional jobs out of work while contributing little to public coffers, needn’t share their tolerance. America’s biggest technology outfits are already facing scrutiny in Washington and other capitals over their market power and influence over society.
Though Galloway calls the Amazon headquarters competition “a giant head-fake and a ruse to occupy the front pages,” he believes Newark will win. In part that’s because, in conjunction with neighboring New York City, it will match many of the goodies other contenders offer. Plus, Galloway jokes, where else would a billionaire like Bezos want to spend his time besides Manhattan?
If making a socio-economic impact matters to Amazon executives deciding on “HQ2,” Newark and Detroit could be joined on a list of targets by Pittsburgh, Cleveland and Baltimore. But none of these offers quite the symbolism that Hartford would, says the Connecticut state capital’s mayor, Luke Bronin. The city Mark Twain called home once rivaled New York on the population and culture fronts. Today it is considering filing for protection from creditors.
“I gotta think someone like Bezos would understand that talk of bankruptcy to some extent reflects a willingness to do what’s necessary to make a place strong,” Bronin told me during a recent visit to his office overlooking the Wadsworth Atheneum, America’s oldest continuously operating public art museum and the first to acquire works by Dali and Caravaggio.
Hartford’s pitch includes its cultural attractions, as well as its location between Boston and New York, a nearby international airport and a skilled and educated workforce in a metro area that counts 1.2 million people. It’s an opportunity to give new life to “a city that was at the forefront of the industrial revolution, that was at the forefront of insurance and financial services, and that still has that legacy visible,” says Bronin.
Amazon’s decision next year will shed some light on how much it considers itself “part of the fabric of the community,” as Bronin puts it. By locating its second headquarters where it can make a real difference, Amazon could initiate one of the biggest impact investments ever.