Amazon said on Friday that it is pausing construction of its vaunted HQ2 corporate offices in Arlington, Virginia, as well as permanently closing eight of its pioneering checkout-free Amazon Go stores.
Bloomberg broke the story on Friday about Amazon's HQ2 decision : "John Schoettler, Amazon’s real estate chief, confirmed the pause … Schoettler said the company remains committed to Arlington, Virginia, where by 2030 Amazon has committed to spend $2.5 billion and hire some 25,000 workers. But the construction moratorium will delay the online retailer’s full arrival at its biggest real estate project, and could create headaches for local developers, as well as construction and service workers banking on Amazon’s rapid expansion."
Bloomberg goes on: "The first phase of the campus that the company calls HQ2 is nearing completion and will be finished and occupied as planned. Amazon, which says it now has more than 8,000 workers in the area, expects to start moving those employees to two newly completed office towers in a 2.1-million-square-foot development called Metropolitan Park, near the Pentagon and Ronald Reagan Washington National Airport, in June.
"The delay affects a larger phase across the street. It calls for three, 22-story office towers and the 350-foot-tall (107-meter) Helix, a corporate conference center and indoor garden designed to echo the Spheres, plant-filled orbs at the heart of the company’s Seattle headquarters. Arlington officials granted the 2.8-million-square-foot project, called PenPlace, its most important approval in April."
The Wall Street Journal quotes Christian Dorsey, chair of the Arlington County Board, as saying, "It really doesn’t concern me. In fact, I’m quite understanding. I think that we are still going to see all of the benefits that we envisioned…It’s just going to take a little longer to realize.”
The Journal also offers some context for the area's development:
"Under an incentive package used to attract Amazon to the region, the company over time could receive up to $750 million from Virginia if it creates enough high-paying jobs and up to $23 million from Arlington County. A new $1 billion Virginia Tech graduate campus for computer science and computer engineering, being built in nearby Alexandria, was part of the region’s winning bid for Amazon’s HQ2."
There also is a new Metro station being built at the location.
"Terry Clower, director of George Mason University’s Center for Regional Analysis, which wasn’t involved in the bid to bring Amazon to Northern Virginia, said one particular strength of Virginia’s HQ2 agreement with Amazon is that it didn’t require the state or localities to provide upfront cash to Amazon," the Journal writes. "Instead the company must hit certain targets.
"Specifically, Arlington County’s incentives to Amazon are tied to the company’s occupying a certain amount of office square footage and to local hotel tax revenue hitting specific levels, Mr. Dorsey said. He said Arlington County has yet to pay the company any incentives.
"Nor has Virginia paid Amazon any money for job-linked incentives, though the company’s hiring is running well ahead of expected targets, said Suzanne Clark, a spokeswoman for the Virginia Economic Development Partnership, the state economic-development authority. Amazon has until April 1 to request its first payment for jobs created through 2022, putting the company on track to get its first state payment in mid-2026, she said."
In Friday's other big Amazon news, GeekWire reports that two of the affected Go stores are in Seattle, two are in New York City and four are in San Francisco. (The San Francisco closures will leave that city without a Go store.)
However, Amazon says that it will continue to open new Go stores.
“Like any physical retailer, we periodically assess our portfolio of stores and make optimization decisions along the way,” an Amazon spokesperson tells GeekWire. “We remain committed to the Amazon Go format, operate more than 20 Amazon Go stores across the U.S., and will continue to learn which locations and features resonate most with customers as we keep evolving our Amazon Go stores."
GeekWire writes that "the move to tighten its physical retail belt comes exactly a year after Amazon announced it was closing 68 brick-and-mortar stores, including all of its Amazon 4-star, Books, and Pop Up stores. The company said at the time that it planned to focus more on its Amazon Fresh, Whole Foods Market and Amazon Go grocery and convenience stores. In the time since, Amazon has been hit by the same economic uncertainty as a number of large tech companies."
The Puget Sound Business Journal writes that "the Go stores shakeup comes as Stephenie Landry, the former vice president of grocery and a 20-year Amazon vet, announced she will be moving to the worldwide sustainability team. Landry said Friday on Twitter that she will take over as vice president of net zero operations. Amazon hasn't shared information on plans for her replacement."
- KC's View:
Humility, Ernest Hemingway once wrote, "was not disgraceful, and carried no loss of true pride."
That sentiment is being tested a bit at Amazon's corporate offices, I suspect.
I'm not sure this has all quite reached the level of Icarus flying too close to the sun, but with every passing day it seems clear that if CEO Andy Jassy is not dismantling Jeff Bezos' vision, he's certainly changed the company's priorities.
Witness, for example, a story that was posted this morning by the Financial Times:
"It has been more than a decade since Jeff Bezos excitedly sketched out his vision for Alexa on a whiteboard at Amazon’s headquarters. His voice assistant would help do all manner of tasks, such as shop online, control gadgets, or even read kids a bedtime story.
"But the Amazon founder’s grand vision of a new computing platform controlled by voice has fallen short. As hype in the tech world turns feverishly to generative AI as the 'next big thing', the moment has caused many to ask hard questions of the previous “next big thing” — the much-lauded voice assistants from Amazon, Google, Apple, Microsoft and others.
"A 'grow grow grow' culture described by one former Amazon Alexa marketing executive has now shifted to a more intense focus on how the device can help the ecommerce giant make money. 'If you have anything you can do that you might be able to directly monetise, you should do it,' was the recent diktat from Amazon leaders, according to one current employee on the Alexa team. Under new chief executive Andy Jassy’s tenure this change of focus has resulted in significant lay-offs in Amazon’s Alexa team late last year as executives scrutinise the product’s direct contribution to the company’s bottom line."
I have no doubt that there is plenty of innovation investment taking place at Amazon, but it has to be pointed out that the company either has lost control of the narrative, or has decided that an alternative narrative that emphasizes prudence is acceptable.
I've written for years that the best way to compete with Amazon is to do things it either cannot do or will not do. At the moment, the list of areas it can't or won't do appears to be somewhat longer than in the past.
Jeff Bezos once said that "if you’re long-term oriented, customer interests and shareholder interests are aligned.” At the moment, that alignment seems off, with Jassy more focused on the latter.