Amazon is looking closer at other operational investments to boost its shipping capabilities.
Amazon spent the past two years absorbing real estate space across the United States. It built new fulfillment centers to meet ballooning demand. Now, its breakneck pace may soon be slowing as it turns its attention to other nodes of its supply chain — including heavier investments in transportation.
A massive real estate footprint is a critical aspect of Amazon's strategy. Operating its own fulfillment centers, sortation centers and delivery stations provides greater control over the supply chain, allowing the company to deliver on the shipping speeds it promises Prime members.
"Shipping speed is the growth driver in e-commerce," said Shipium co-founder and CEO Jason Murray, former vice president of supply chain and retail services at Amazon. "Prime submitted that as the number one fact. You can do whatever you want with marketing, checkout, one-click (ordering), whatever it is — speed is what drives everything."
Amazon's real estate footprint is a case in point. The e-commerce giant nearly doubled its operations capacity in the past two years to keep up with demand, CFO Brian Olsavsky said on an earnings call in February. Fulfillment center growth has been a large part of this equation — Amazon grew its number of U.S. fulfillment centers by 30% in 2021, according to data from supply chain consulting firm MWPVL International as of Feb. 16.
But investments alone have not been enough for Amazon to reach its desired shipping speeds. One-day delivery levels for Prime services are not yet back to where they were pre-pandemic. So now, Amazon is looking closer at other operational investments to boost its shipping capabilities.
"We see [fulfillment center spend] moderating," Olsavsky said, adding future growth will probably match other sides of the business.
Experts say the development was likely after the initial e-commerce boom fueled by the COVID-19 pandemic cooled off.
