NY E-Commerce Startups Ponder a Future With Amazon “HQ2” in Backyard

Xconomy New York — 

As Amazon moves into its new home in the Big Apple, the company will find itself immersed in a storied—if tumultuous—local retail industry.

Unlike the other contenders for Amazon’s so-called “HQ2” satellite offices, New York City is home to the nation’s historical retail roots on “Fashion Avenue,” as well as a growing e-commerce startup scene. Although some observers argue that Amazon has spawned a surprising lack of fast-growing startups in its hometown of Seattle, leaders in New York’s tech community are hopeful the tech giant’s plans to significantly expand its presence here will have a positive influence on the local scene.

For one, it could provide a huge training ground for innovation, says Pano Anthos, managing director of XRC Labs, a retail tech accelerator in New York. “Amazon employees are going to say, ‘I see a gap in the market, and I want to start something,’” he says. “They will have inside perspective on logistics, user experience, and artificial intelligence, and they will give rise to opportunities that we wouldn’t have had access to.”

Earlier this month, Amazon selected Long Island City in Queens, N.Y., as well as suburban Washington, D.C., to house its additional “headquarters.” The East Coast locations were tapped after a 14-month frenzy among regional communities in North America that offered billions in economic incentives to lure Amazon.  Amazon says it plans to invest a total of $5 billion in the two outposts and expects each to employ 25,000 high-paid professionals. “This is bringing more attention to New York as a fashion tech hub,” says Michelle Bacharach, founder and CEO of FindMine.

New York is home to about 7,000 tech startups and has the most “unicorn” companies in the nation after Silicon Valley, according to Startup Genome’s 2018 report. The city’s innovation ecosystem has grown from about $2.3 billion invested in startups in 2012 to about $13 billion in funding in 2017, the report added.

While much of that activity is in the financial services sector, tech innovation and investment in healthcare and commerce is growing. For example, New York-based adtech company AppNexus has raised more than $300 million in venture capital. In addition to XRC Labs, the city is home to the New York Fashion Tech Lab, which supports women founders in retail; AccelFoods, a venture fund that invests in food and beverage companies, and Retail X, a self-described boot camp for “pre-seed” startups.

As the city’s traditional garment industry has faltered—employment in the city is down by 90 percent since the 1990s, according to the U.S. Commerce Department—civic and business leaders have launched projects for tech-enabled spaces that will attract the sector’s next generation of companies. Made in New York, which is planned to open in 2020, will include nearly 200,000 square feet for companies in pattern-making, sewing, and sample-making.

So, as Amazon ramps up its presence in this community, will the giant tech company boost the city’s young e-commerce startup community or overwhelm it? The answer is both, some founders say.

Bacharach says she hopes Amazon follows the example of Google, which first opened a New York office in 2000 and has expanded its footprint to about 12,000 employees, according to media reports.

“They program a lot of events for startups,” she says. “They’re developing an ecosystem rather than being a black hole that’s sucking everything in.” (It’s worth noting that Amazon already has offices in New York, and it has been one of the area’s most active tech job creators in the past few years, according to a quarterly report from executive recruiting firm On Partners.)

Andrea Seemayer, founder and CEO of fashion tech startup A.Lynn, agrees with Bacharach. “If they’re smart, which I believe they are, they will build a cooperative community that encourages outside companies to partner with Amazon instead of working against them,” she says.

Seemayer says she thinks Amazon’s growing presence will accelerate the pace of change in traditional brick-and-mortar retailing. “I realistically do not believe there is room in the marketplace for all of the luxury retail giants right now,” she says. “The wholesale system is broken. If Amazon is great at one thing, it is disrupting.”

But, in addition to New York real estate rents potentially trending upward as a result of HQ2, the going rate for engineering talent is likely to tick higher. “All of our tech data science team is in Spain … or that could be an issue,” says Jade Huang, co-founder and CEO of StyleSage.

At least fashion tech companies are already used to competing with Wall Street, which can offer techies annual salaries as high as $200,000, Bacharach says. “We can’t afford those salaries,” she says. “One of the ways we get talent is motivating and interesting work. There are diminishing returns to money.”