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Amazon may have slowed its warehouse expansion, but it still added space equal to half of Walmart’s distribution capacity this year

Amazon warehouseAlbert Elliott, an Amazon warehouse worker in Raleigh, North Carolina, recently started a second job as a janitor at a community college.

Eduardo Munoz Avarez/AP

  • Amazon dialed back its logistics plans earlier this year in a sign the e-commerce boom was over. 
  • Even so, Amazon’s warehouse footprint is “remarkable” compared to competitors, analysts say. 
  • Amazon added roughly half of Walmart’s distribution network this year and will keep adding in 2023.

Amazon added roughly 79 million square feet of warehouse space this year and plans to add 63 million more next year, according to Wells Fargo analysts based on conversations with Marc Wulfraat — President of MWPVL International, a logistics consulting firm, and the preeminent chronicler of Amazon’s immense logistics empire. 

Launching nearly 1,400 football fields worth of logistics capacity in a single year would seem impossible to most other e-commerce or logistics powerhouses, but it’s actually a much smaller undertaking than Amazon planned at the beginning of 2022. The company delayed new building openings and canceled 11 million square feet of projects this year, according to Wells Fargo, citing Wulfraat.

But Amazon’s moves are by no means a retreat since the company continues to improve delivery speeds and dominate the US market in terms of warehouse footprint.

Between 2020 and 2022, Amazon added more than 200 million square feet of warehouse space, doubling its physical footprint in the United States. When online orders slowed, the company ended up with $2 billion in unused space and another $2 billion in overstaffing

The subsequent slowdown in warehouse development, announced alongside the company’s stock-tanking earnings in April, was one of the first major warnings of an economy entering shaky ground. 

It also revealed a theme that continues to repeat across e-commerce and tech businesses in 2022: overbuilding to keep up with explosive demand during the pandemic resulted in dramatic pullbacks and layoffs. 

“We’ve built a physical fulfillment center footprint over 25 years that we doubled in 24 months. And we made that decision even though we knew we might be overbuilding because it took two years to build fulfillment centers at that time,” CEO Andy Jassy said in November. “Given that we’re going to always shade on the side of customers, I would have done it again.”

Now, with the rest of the year’s data in, Amazon exiting its “overbuilding” phase was “far from a complete stop,” the Wells Fargo analysts say. 

Amazon’s additions this year are equivalent to half of Walmart’s entire distribution center footprint, according to the analysts. And the moves to slow or cancel some planned developments increased efficiency within the existing network. Existing fulfillment centers have been running at 85% utilization and the moves to slow growth of the warehouse network could help Amazon get back to the record profitability of 2021, according to Wulfraat via Wells Fargo 

This year’s additional square footage went mainly to last-mile delivery facilities, indicating Amazon’s intention to keep delivery speeds improving even as order volume drops. Before the pandemic, Amazon was briskly headed toward one-day Prime service and has been trying to get claw back that progress ever since. 

“Delivery speeds are getting very close to where we want them to be,” CFO Brian Olsavsky said in October.

The 63 million of additional square feet expected next year represents 11% growth — most of that going to fulfillment centers and more delivery facilities. 

Read the original article on Business Insider