TORONTO HAS BIG CHALLENGES LANDING NEW AMAZON HQ
Former executive at tech giant says local governments may not be keen on tax incentives company seeks
James Thomson is an ex-head of Amazon Services, the division that recruits sellers to the tech giant’s marketplaces. A Canadian, he is also the co-author of The Amazon Mar
ketplace Dilemma and a partner in Buy Box Experts. We asked him about Amazon and Toronto’s quest to win a bid process to become home to the company’s second headquarters.
What is Amazon looking for in a host city for “HQ2”?
Amazon has publicly outlined criteria, including a city with one-millionplus population, strong training grounds for engineers and an investment to enable the build-out of up to 50,000 people. Realistically, I see Amazon executives wanting to relocate only to a high-culture city with lower cost of living. Seattle has become very expensive to afford even on a $150,000-a-year salary for a mid-level computer engineer, so attracting new talent to Seattle is getting harder. I also expect Amazon doesn’t want to compete with a number of large local IT-dependent firms — Amazon wants a hiring advantage for at least a few years.
What are Toronto’s strengths and weakness as a bidder?
Toronto is undoubtedly a cultural world-class city but has a very high cost of living and is more congested than Seattle. I doubt Amazon will put itself in a distant suburb of a major city. I also suspect there will be a stigma of putting its headquarters in another country — Amazon will have to convince a lot of existing executives to relocate, and another coun- try with higher personal tax rates is a bigger question mark than another American city. I am not optimistic that the Ontario and Toronto governments will be excited about spending the kind of investment/tax incentives that Amazon is seeking. Yes, HQ2 is an amazing long-term opportunity, but the payment is also long-term.
What cities will be the prime contenders, based on Amazon has said and what you are hearing?
I have heard the cities of Austin (Texas), Charlotte (N.C.) and Pittsburgh mentioned but anticipate Amazon will accept less tax incentive/investment for a broader commitment to build out much more access to IT-trained graduates. Recruiting is a huge problem for Amazon, with over 9,000 job openings with office jobs just at Amazon’s Seattle headquarters. Most of these are engineering roles — there aren’t enough recently trained candidates in North America to support Ama- zon’s current growth.
Amazon is talking about long-term investment of up to $5 billion and up to 50,000 jobs. How big a deal for a city is landing HQ2?
Any city that lands this deal will see a huge immediate opportunity to become a significant global centre of innovation and IT development. The big question is how much will a local government put up to make this happen. The expense is a trade-off against schools, infrastructure, health care, etc. Can Toronto support 50,000 high-net earners who all want nice homes, nice restaurants, easy commutes, etc.? Amazon is NOT a fan of unions or regulation. How does Ontario government accommodate that?
What advice would you give Toronto bid boosters as they decide how to try to land this fish?
Amazon uses data to make all of its decisions. And it follows the Amazon Leadership Principles to figure out all tough problems. Position yourself along those leadership principles using very specific comparative data, and you will be speaking “Amazon talk.”
Amazon has been criticized in the past for the way it treats workers. Should this give Torontonians pause about putting considerable effort, and potentially tax breaks, into a bid?
Most complaints are related to warehouse employees. Unfortunate, but true. From a corporate office perspective, it is a very tough place to work, but amazing growth and innovation have come from this. And thousands of people have become rather rich. What do you want from your job? After media attention to the issue, Amazon saw a huge increase in job applicants as MBAs took on the culture as a challenge to prove that they are “up to the challenge” to thrive at Amazon.