Amazon Wants to Double Its Same-Day Delivery Facilities

(Photo by Super Straho via Unsplash)
(Photo by Super Straho via Unsplash)

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Maybe Amazon will one day figure out how to get your stuff to you before you even order it, but until then you’ll have to settle for same-day delivery.

Less than a year after Amazon said it had too much warehouse space on its hands, the company says it wants to cultivate new real estate by doubling the number of same-day delivery centers it owns over the next two years. Amazon hopes the move can help it cling to its reputation for ludicrously fast delivery as customer interest in its Prime subscription seems less ardent than in previous years.

Speed Round

As demand for delivery spiked with the covid pandemic in 2020, Amazon went on a big real-estate spending spree so warehouse capacity could keep up. By 2022 however, the lockdown-fueled delivery boom had slowed down, and Amazon CFO Brian Olsavsky told analysts that the overstaffing and mismatched space versus demand had resulted in “$2 billion in costs compared to last year.” The company closed warehouses and shuttered plans for new builds, but now it looks like it’s getting back into real estate, just with a more decentralized approach as Amazon’s vice president of transportation Udit Madan told CNBC the company has been making efforts to move away from a “hub and spoke” logistics network.

Amazon has clearly figured out that, as Tom Petty sang, waiting is the hardest part. Way back in the mists of 2005, its Prime service offered super-speedy two-day delivery, then it made next-day delivery the holy grail. Now, it’s all about same-day delivery:

  • Amazon’s same-day sites are much smaller than its traditional warehouses near large metropolitan areas and store the 100,000 most-popular items on Amazon, per The Wall Street Journal. According to a statement from Doug Herrington, the company’s head of Worldwide Amazon Stores, once a same-day site gets a customer order the requested product is out the door 11 minutes later, on average.
  • Much as Amazon famously loves speed, Globaldata analyst Neil Saunders told Bloomberg that investors might be dubious about the upfront costs associated with building the new facilities. “Amazon has got some work to do in convincing people this will be beneficial to the bottom line because investors will be a little bit spooked by it,” Saunders said.

The Other Side of the Coin: Amazon’s feverish tempo is being put to the test in its home state of Washington. The state’s Department of Labor and Industries has issued Amazon four fines since 2021, all of which the company is appealing and which are being held under the legal microscope in a trial that will stretch over the next few weeks. Of course, if Amazon had been allowed to organize it, there’d be a verdict by 10 p.m. today.