Demand cools! Amazon cancels and postpones two major warehouse expansion plans

According to foreign media reports, Amazon canceled the construction of a warehouse in the Ypsilanti (US city) area and postponed a new warehouse construction plan near Ann Arbor (the sixth largest city in Michigan, USA).

It is reported that since the end of last year, Amazon has planned a major expansion in its distribution network, including the construction of "last mile" warehouses in Ypsilanti and outside Ann Arbor. The Ypsilanti warehouse was originally planned to be 183,000 square feet, and the Ann Arbor warehouse was planned to be 143,000 square feet, and the Ann Arbor warehouse is expected to become the hub of Amazon's delivery truck fleet.

In the past two years, driven by the epidemic, the global e-commerce market has achieved rapid development, online shopping demand in various regions has surged, Amazon's operating capacity has almost doubled, and it plans to expand further. However, since the beginning of this year, e-commerce demand has cooled, consumer online shopping activities have slowed down, Amazon's first-quarter earnings report was not good, and costs increased by about one-third, of which the cost of the distribution network expansion plan increased by $6 billion. The biggest reason is that there are too many people in the distribution network, resulting in a decrease in productivity.

In order to avoid incurring more labor costs and reduce operating expenses in 2022, Amazon is putting the brakes on its expansion plans, not only delaying the opening of some warehouses, but also canceling plans for some new warehouses.

According to foreign media reports, Amazon has postponed or canceled plans for at least 13 facilities in its distribution network this year. The planned shifts affected locations in Texas, Florida, Louisiana, Tennessee and California.

Marc Wulfraat, founder of supply chain consulting firm Marc Wulfraat, said a wider warehouse footprint would help the company reduce shipping costs, however several large warehouses that Amazon expected to open in the second half of 2022 will be delayed by at least a year to avoid further increases in labor expenses.

However, foreign media reported that even if Amazon's distribution network expansion plans slow down, it still plans to develop a 143,000-square-foot delivery warehouse in Pittsfield, southeast of downtown Ann Arbor, in the next few years .

According to MWPVL data, even though Amazon has canceled and suspended many warehouse expansion plans, few companies can match Amazon's warehouse footprint in the United States. Because Amazon currently has nearly 1,200 active distribution facilities with a total area of ​​nearly 376 million square feet. Walmart, another e-commerce platform giant, has only 197 active facilities with a total area of ​​about 145 million square feet, while Target has 52 facilities with an area of ​​only 58 million square feet.

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