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Jun 09, 2023

Amazon closes, cancels more warehouses as cost

After a whirlwind of facility openings to keep up with the pandemic-fueled

After a whirlwind of facility openings to keep up with the pandemic-fueled e-commerce boom, Amazon made big cuts to its operating costs throughout 2022 as excess capacity in its fulfillment network weighed on profitability. Those efforts are slated to continue this year.

In a Feb. 2 earnings call, Amazon President and CEO Andy Jassy said reducing the cost to serve customers within the company's operations is a top priority. Amazon's aggressive efforts to expand its fulfillment center and transportation network have created areas within it where the company is working to become more efficient and productive.

"To figure out how to be really efficient across all those links and have them be highly utilized and to get the flows in those facilities working the right way, it takes time," Jassy said. "So we're working very hard on it. I'm pleased with the progress we made in Q4, and you can see that in some of the results. But that work will extend into '23."

Fulfillment centers, which pick, pack and ship orders, and delivery stations, which prep orders for final-mile delivery, are the facility types that have been most affected by the cost-cutting measures. Twenty-one facilities in five countries outside the U.S. have also been closed, canceled or delayed, according to MWPVL.

"Of course, as we’ve always done, we evaluate our network to make sure it fits our business needs and to improve the experience for our employees, customers, partners, and drivers," Kelly said. "We may close or delay facilities, enhance existing facilities, or open new facilities, and we weigh a variety of factors when deciding where to develop future sites or maintain a presence."

Despite the purported closures and cancellations, Amazon still has plans to open 231 facilities totaling more than 82 million square feet, per MWPVL data. More than half of these buildings are slated to be delivery stations, but Wulfraat noted that Amazon's cost-cutting actions could put some of these openings at risk.

"I am seeing in some instances they're opening up new delivery stations in geographies where they don't currently operate," Wulfraat said of Amazon. In other situations, the company "built a brand new delivery station and the developer handed over the keys and they immediately threw it onto the sublease market. So right now, we're in a state of flux and it's hard for me to say."

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