More than 1,000 D.C. business leaders were on hand Thursday evening in the hopes of hearing a big announcement from Amazon CEO Jeff Bezos, but the richest man in the world declined to give any new information on his company's search for a second headquarters. Amazon CEO Jeff Bezos speaking to The Economic Club of Washington D.C. "We will announce the decision before the end of this year," Bezos told the Economic Club of Washington D.C. "We’ve made tremendous progress.
The team is working their butts off on it and we will get there." Carlyle Group co-founder and Economic Club President David Rubenstein, who was interviewing Bezos, followed up by lightly suggesting the head of the Seattle-based company might want to locate in another Washington area. "In Seattle, we call this the other Washington," responded Bezos, who last year bought a $23M D.C. mansion and owns the Washington Post.
While that was the only discussion of HQ2 in the hourlong interview, Bezos touched on a wide variety of other topics, including Amazon's entrance into bricks-and-mortar retail, last year's acquisition of Whole Foods, Amazon Web Services data centers and his newly announced $2B philanthropic fund. Amazon has been expanding its brick-and-mortar retail presence with concepts like its cashierless Amazon Go grocery stores, its Amazon Books stores and its campus pickup locations. Bezos said he has long been thinking about taking the e-commerce company into the physical retail world, but was waiting for the right concepts.
"We’re very interested in physical stores," Bezos said. "I’ve been asked for years if we’d ever open stores and I always say 'yes, but only when we have a differentiated offering,' ... That's what Amazon Go is, it's completely different. Amazon Bookstore is completely different." Bezos noted that while Amazon claims about 40% of online sales, physical retail purchases still comprise 85% of total sales in the U.S. market, so his company has plenty of room for growth in that space. Amazon made a big jump in its retail push last year with its $13.7B acquisition of Whole Foods, and it has begun to integrate its Prime delivery service with the organic grocer's offerings, but Bezos said there is more to come. "We have ideas about how to merge Prime and Whole Foods — those are still rolling out, you haven’t seen them yet — to use Amazon Prime to make Whole Foods a very differentiated experience," Bezos said. "What we’re going to be able to do is take some of our resources, some of our technological know-how and expand the Whole Foods mission."
The tech giant has also been exploding into another sector of commercial real estate: data centers. Amazon Web Services has been rapidly filling up data center space in Northern Virginia and other areas as it continues to dominate the market for offering cloud computing services. Bezos said the idea came over 15 years ago when Amazon's engineers were building its own data centers and realized how much work was going into the effort that does not add significant value to the business. He realized every company in the world would prefer to rent data center space from a provider like AWS rather than build it themselves.
Amazon Web Services first launched in 2002 and has become a massive company that last year brought in over $17B of revenue. Bezos said AWS was able to expand rapidly to dominate the cloud computing market because there weren't any other companies chasing it, as there were with other Amazon product launches like Kindle and Echo. "A business miracle happened," Bezos said. "This never happens, this is like the greatest piece of business luck in the history of business as far I know. We faced no like-minded competition for seven years. It’s unbelievable." Bezos also discussed the $2B philanthropic fund he announced Thursday. The Bezos Day One Fund will give money to family homeless shelters and create a network of Montessori-inspired preschools, which he will operate through a nonprofit.
"A lot of people, probably most of the people in this room, have been very mindful about making sure their kids got very good preschool educations and got that kind of head start; that head start compounds fantastically," Bezos said. "If you can get that starting at age 2, 3 and 4, there’s a powerful compounding effect there. The money spent there is going to pay gigantic dividends for decades."
Before Bezos came on stage, JBG Smith CEO Matt Kelly, the head of D.C.'s largest commercial real estate company, spoke to the Economic Club about the new affordable housing initiative JBG is launching with Federal City Council. JBG Smith is also a contender for Amazon HQ2 with its portfolio in Crystal City and Potomac Yard. "There are two truths the business community needs to understand about this issue," Kelly said of affordable housing. "No. 1, government and philanthropy alone cannot solve it. And No. 2, housing is as important as education when it comes to accessing the labor and talent that we need to grow our local economy."
CORRECTION, SEPT. 14. 12:50 P.M. ET: David Rubenstein is the co-founder of Carlyle Group. A previous version of this story misstated his role with the private equity firm.
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