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  • Writer's pictureJeremy Conradie.

Amazon Downscaling Plans For New Warehouses

Amazon has taken the decision to reduce the size of its delivery operation amid slowing sales growth. It is ending plans for dozens of existing facilities around the U.S., according to a closely watched consulting firm.

MWPVL International Inc., tracks Amazon’s real-estate footprint, and it estimates the company has either shuttered or killed plans to open 42 facilities totaling almost 25 million square feet of usable space. The company has delayed opening an additional 21 locations, totaling nearly 28 million square feet, according to MWPVL. The e-commerce giant also has also canceled a number of European projects.

This week Amazon warned that it plans to close two delivery stations next month in Hanover and Essex, near Baltimore, that employ roughly 300 people. The moves are a significant difference from previous years when the world’s largest e-commerce company typically entered the autumn with plans to open new facilities and hire thousands of workers to prepare for the holiday shopping season. Amazon continues to open other facilities where it requires more space to meet customer demand however.

“There remains some serious cutting to do before year-end — in North America and the rest of the world. Having said this, they continue to go live with new facilities this year at an astonishing pace.” - Marc Wulfraat, MWPVL’s founder and president.

“We weigh a variety of factors when deciding where to develop future sites to best serve customers. We have dozens of fulfillment centers, sortation centers and delivery stations under construction and evolving around the world.” - Maria Boschetti, Amazon spokesperson.

Chief Executive Officer Andy Jassy has planned to unwind part of a pandemic-era expansion that left Amazon with a surplus of warehouse space and too many employees. During the second quarter, Amazon’s workforce decreased by roughly 100,000 jobs to 1.52 million, the biggest quarter-to-quarter contraction in the company’s history.

The Seattle company has also been looking to sub-lease at least 10 million square feet of warehouse space, Bloomberg reported in May.

When homebound shoppers flocked online during the pandemic, Amazon doubled the size of its logistics network over a two-year period. The speed of the buildout exceeded that of rivals and partners like Walmart Inc., United Parcel Service Inc. and FedEx Corp. During that time, Amazon was opening a new warehouse somewhere in the U.S. roughly every 24 hours. Jassy told Bloomberg in June that the company took the decision in early 2021 to build toward the high end of its forecasts for shopper demand, erring on the side of having too much warehouse space rather than too little.

Amazon operates more than 1,200 logistics facilities, large and small, around the U.S.

How much overcapacity Amazon needs to work through is hard to measure though, and some analysts believe the extra space will come in handy during the Christmas holiday season.

Source: Bloomberg

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