While reviewing your investment portfolio at the moment is an exercise in self-flagellation, if you own Amazon stock, it’s likely poised for a rebound at some point. The Seattle e-commerce behemoth has revolutionalized online shopping. But like most companies, Amazon started small – a Seattle office in the mid-1990s … and a dog. They eventually opened one warehouse which turned into 10 and now number roughly 110 in the US and over 180 globally.
Amazon warehouses also have the distinct feature of not being referred to as warehouses. Rather, they’re fulfillment centers. They fulfill customer orders and are models of efficiency with robots and humans collaborating hand and switch. Despite logistical hiccups that prompted Amazon leadership to rein in their logistics expansion, the company is still looking to establish more warehouse projects moving forward.
In late July the e-commerce leader was granted approval to build a 3.1 million-square-foot, five-story distribution center in western New York. Next will be Colorado and Southern California. Some had doubted the expansion of fulfillment centers would remain a priority for Amazon following the company’s first quarterly loss in seven years (reported in April). Growth was the slowest in two decades and online revenue was down 3%. This had followed a two-year run of record profits as the pandemic took hold and folks turned to online shopping.
Yet, Amazon representatives explain that the capital investments in their fulfillment centers are long-term bets. Back in April Amazon communicated its objective of subleasing 10 million plus of warehouse square feet. While this sounds like a significant chunk, it would only represent roughly 2% of Amazon’s overall square footage. The first quarter of 2022 was characterized by overcapacity that contributed to $2 billion of extra costs. Moving forward, the western New York fulfillment center comes with a price tag of $550 million. The center will be known as a “sortable” fulfillment center. This is where goods are delivered in bulk to middle-mile and last-mile locations.
In terms of Colorado and California, the former will be home to a 4.1 million-square-foot facility and the latter a 3.9 million-square-foot center. Both will rank as two of Amazon’s largest fulfillment centers to date. To put Amazon’s pull-back and simultaneous expansion efforts into perspective, the firm has closed, canceled, held, or listed for sublease 25 plus fulfillment centers and delivery stations so far this year. But at the same time, they’re expected to onboard approximately 250 facilities before the end of the year. Some of these facilities will be the typical monstrous distribution centers while others smaller sites where orders are sorted and moved onto delivery trucks.
The western New York fulfillment center will employ approximately 1,000 people. Multistory warehouses are rare in the US and Amazon expects 1,500 robots working in conjunction per floor. Clearly, the e-commerce giant is not slowing down due to some sour quarterly times.
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