Amazon Is Determined To Remain King In Order Fulfillment
By Sam Lewis
E-commerce giant is dropping big bucks into warehouses and new initiatives
Order fulfillment has become the number one priority for Amazon. Since 2010, the company has spent nearly $14 billion on 50 brand new warehouse facilities. That total is more than Amazon has spent on warehousing in its entire existence, and it doesn’t plan on stopping expansion any time soon. Five new Amazon fulfillment centers are scheduled to open throughout the U.S. before the end of 2013, and the company will be hiring 5,000+ employees to man this massive operation. “We’ve standardized fulfillment centers in such a way that opening them and replicating them happens very fast,” Dave Clark, vice president of worldwide operations and customer service at Amazon, said in an interview at the Chattanooga, TN warehouse.
Despite Amazon losing $39 million last year due to these expansions of order fulfillment, the effort has one goal in mind: remain the best and the fastest at fulfilling orders. Spending on fulfillment obviously had to increase, jumping more than 40 percent each year from 2010 to 2012 compared with 24 percent in 2009. Even with the added expenses of delivery and the loss of millions of dollars last year, investors are giving Amazon the benefit of the doubt. The company’s stock has doubled in price since the massive expansion of warehouses in 2010.
Amazon has realized that competitors like Walmart and eBay are now a real threat in the growing market of products that can be ordered online and delivered the same day, sometimes within a matter of hours. “What Walmart and eBay are working on is, can they be faster than Amazon,” said Matt Nemer, a San Francisco-based analyst at Wells Fargo & Co. “It might not be the highest margin sale in the world, but they can potentially get something to you in an hour.” EBay has begun delivering same day orders in some cities, and Walmart — with 4,700+ locations in the U.S., putting most stores within a few miles of customer’s homes — has continuing to push its enormous sales numbers into e-commerce.
Ultimately, Amazon would like to fulfill most orders in the same day. However, that goal is still a longshot. The company would have to place fulfillment centers closer to the 20 most populated metro areas in the U.S. to reach half of the country with same-day delivery services. That means building another 12 warehouses on top of those that are already built and have been announced to be built, according to MWPVL International. As Amazon’s recent history has proven, it is not going to let any competitor beat them to that punch, regardless of how much it costs.