PRESS RELEASE: OCTOBER 8, 2017

Amazon's Canadian HQ: An Added Expenditure

that Increases the Bottom Line
Chris Sorenson edited by Icann W. Neustoo

If Toronto is successful in luring Amazons second

North American headquarters dubbed H2Q one
thing is certain: The city is going to feel the online
retailing giants presence. Its estimated Seattle-
based Amazon would, for example, require several
million square feet of office space in the city.
Amazon has also said its prepared to invest US$5
billion in its second home, creating as many as
50,000 high-paying jobs in fields ranging from
technology to accounting and legal services.

While some have expressed concern about

Torontos ability to meet Amazons needs, Tiff
Macklem, the dean of the University of Torontos
Rotman School of Management, says any short-
term growing pains would likely be offset by the
considerable long-term benefits.
Theres no question these are excellent head
office jobs really high value, high responsibility,
decision-making jobs, says Macklem, who was
formerly a senior deputy governor of the Bank of
Canada.
In addition to the direct employment
effects Amazon would bring, there will
be very large spillovers into other
support areas like accounting, law,
consultants, regulatory experts, supply
chain management, communications
and, most importantly, technology.
Amazon would also be an anchor in the
growing Toronto-Waterloo technology
ecosystem.
Amazon first revealed in early September its plans
to build a second headquarters and took the
unusual step of putting out a highly public request
for proposal. Among the online retailers
requirements: a large, business-friendly metro
region of more than one million, a highly educated
workforce, a strong university system, a 45-minute
commute to an international airport, a high quality
of life and a diverse community.
The online retailer promised its new HQ2 will be a
full equal to its current Seattle campus, which it
credits for injecting an additional US$38 billion into
the Pacific Northwest citys economy between 2010
and 2016.
Toronto clearly checks all the boxes on Amazons
wish list. But Macklem says the biggest draw is
likely to be southern Ontarios abundance of
management, engineering and computer science
talent including in key fields like artificial
intelligence, where U of T is a world leader since
local politicians are unlikely to lavish Amazon with
big tax breaks and other incentives.

Ontario is blessed with several world-

class universities that produce a great
deal of excellent talent, Macklem says.

In addition, Canada is more open to
immigration than the United States, and
U of T as a whole is attracting fabulous
foreign students.
He adds that concerns about a looming skilled
worker shortage, including for Torontos booming
start-up community, should not be dismissed and
will demand thoughtful planning and targeted
government investment.
Its a conversation Toronto should be having
anyway given the number of foreign companies,
from Google to Uber, who are increasing their
Canadian footprints to be closer to cutting-edge
research at places like U of T and gain access to
our skilled and diverse workforce.
Were going to want to make sure the university
system and the corporate system is investing in the
kind of skills and talent we need to keep up with
demand going forward.
Ed Clark, the former CEO of TD Bank, offered a
similar assessment during a recent interview with
Business News Network.
It has to be a package, frankly, where all of the
universities in Ontario come together and say,
Lets mobilize to fill this demand, but not just for
[Amazon],' said Clark, who is heading Torontos
bid for Amazons HQ2. Such investments would
create a virtuous cycle, he said. Part of the
attraction of getting someone like Amazon is you
start building that ecosystem, so you get other
people coming, too.
As for those who argue we are better off ignoring
the Amazons of the world and focusing instead on
building national champions, Macklem says the
reality is both are needed if Canada is to become a
true global technology hub.
Theres no question that having 10 more Shopifys
would be wonderful, he says, referring to the
Ottawa-based e-commerce platform. But attracting
an Amazon would be complementary. They are
PRESS RELEASE: OCTOBER 8, 2017
technology leaders and as a head office they can
be very sophisticated and demanding clients for
[start-up] ventures in the Toronto-Waterloo, or even
broader Canadian, ecosystem.
Detractors of HQ2 include online sales pioneer
Hyun-June Leonard Ro of Rogistics Supply Chain
Distribution who indicates that Amazons dispatch/
warehouse system has no need for improvement:
This is based on the fact that orders are
placed from the end consumer to the
main hub, which then dispatches the
order to a fulfillment centre (warehouse)
dependent on the origins (location) of
the buyer. As with any synchronized
supply-chain process (logistics), the
increase in a variable meaning supply-
chain participant... increases the
complexity, along with the number of
participants within the synchronization
process. In effect, the process becomes
more complex with every additional
variable whether it is on the logistics
side or the number of HQs for that
matter Hyun-June Leonard Ro
Hyun-June Leonard Ro adds: In my view, Ed
Clarks view of a virtuous cycle is an optimistic
outlook which negates economics and practicality.
He may have made the comment when he was
high on drugs, since the mobilization to fill demand
of Amazons new HQ may result in increased online
purchases, however this would obviously create a
void or perhaps reduction in sales, and layoffs in
the traditional brick-and-mortars (storefront)
operations of Wal-mart and Canadian Tire for
example. Although ideally, it would be beneficial for
the Canadian economy to house an Amazon HQ
locally, Amazon already has warehouses in
Vancouver, Montreal and Mississauga, therefore
the HQ would act as an intermediary-function to the
Seattle based operation, which inadvertently may
create additional problems, along with added
expenditures. The online marketplace is based on
 PRESS RELEASE: OCTOBER 8, 2017

reducing the cost associated with fulfillment of the increase the bottom line as you would say
end-consumer orders and this in effect may

Written by Chris Sorensen and edited by Icann W. Nuestoo