Amazon plans to build 250 new warehouses. Is it more confident about the second half of the year?

Previously, Amazon announced that it would suspend the construction of multiple distribution centers and warehouse leases in order to reduce costs. However, according to foreign media reports, Amazon has recently started to build multiple large warehouses.

According to documents from the building department of Niagara Township , New York, Amazon is planning to build a new 3.1 million square foot , five- story logistics center in the town , which will be its first sortable distribution center.

Meanwhile, the town ’s planning board also approved Amazon’s request to build a $550 million warehouse , one of the first new warehouse projects to move forward since Amazon announced it was scaling back its warehouses .

In addition, Amazon is also planning large logistics centers in Southern California and Colorado .

It is understood that Amazon is stepping up the construction of a 5 - story logistics center in Ontario, California , which covers an area of ​​4.1 million square feet, and a 3.9 million square foot 5- story logistics center in Loveland, Colorado is also under construction . These two logistics warehouses will become one of Amazon's largest warehouses.

Amazon expects to open about 250 more warehouses in 2022 , according to Canadian supply chain consulting firm MWPVL International Inc.

Amazon has announced several times before that it would suspend the construction of logistics and other infrastructure, and has also transferred or terminated the leases of multiple warehouses in advance. In order to control losses caused by the sluggish e-commerce this year, it even laid off nearly 100,000 employees. But now it is vigorously promoting logistics construction, which is really puzzling.

There are speculations that this may be related to the unexpected profit growth in Amazon's second quarter financial report. Amazon also predicted that sales in the third quarter are expected to reach 130 billion US dollars, an increase of 13% to 17% . Boosted by this news, Amazon's stock price has soared in recent days, and its market value has increased significantly, which may have strengthened its confidence in its strategic layout.

After the quarterly earnings report was released, Amazon's chief financial officer   Brian Olsavsky also said that it is estimated that about 40% of the funds this year will be used to improve storage capacity and transportation efficiency .

Since the pandemic hit e-commerce, Amazon has been actively accelerating its logistics expansion, adding tens of millions of square feet of warehouse space and hiring tens of thousands of workers to meet the growing demand of consumers at home. As of May 2022, Amazon's warehouse space has jumped from 165 million square feet before the pandemic to 379 million square feet.

However, with the combined effects of high inflation and the return of brick-and-mortar stores , e-commerce growth has stagnated recently.

In May this year , Amazon announced that it would slow down the construction of its logistics network. According to MWPVL data, so far, Amazon has canceled, closed, sublet or shelved more than 25 delivery stations and distribution centers across the United States, and postponed the opening of another 15 new warehouses .

However, industry insiders said that the fact that Amazon is now stepping up its efforts to advance several large warehouse projects shows that the suspension is aimed at specific types of warehouses, while broader logistics construction work is still in progress.

Amazon said it weighs a variety of factors when deciding to add warehouses, exploring multiple locations and making adjustments based on operational needs.

It is reported that the 250 new Amazon logistics centers expected to be built this year include super-large distribution centers , nearly 100,000 square feet and smaller small distribution stations focusing on the last mile .

MWPVL also expects Amazon to open 21 large, multi-story fulfillment centers this year, totaling about 62.3 million square feet , and while some of those may be delayed under the company's logistics review , they won't stop .

Marc Wulfraat, founder of MWPVL , said that in fact Amazon never considered putting the brakes on its development this year .

The current series of actions also show that building large warehouses to support Amazon's US logistics network remains a top priority in Amazon's strategy .

Amazon was able to achieve profit growth that exceeded expectations despite slowing growth, low consumer sentiment and a sluggish market in the first half of the year. With the arrival of the peak season in the second half of the year, it is expected that Amazon will be able to return to the track of profit growth. This move also proves that it has great confidence in the future development trend.

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