Amazon closes 42 warehouses, postpones 21 warehouse projects

Recently, according to foreign media reports, due to slowing sales growth, in order to reduce the scale of its huge delivery business, data from logistics services company MWPVL showed that Amazon has closed or stopped plans to open 42 facilities with a total available space of approximately 25 million square feet. Amazon has also canceled some European projects, mainly in Spain.

In addition, related news showed that Amazon postponed the opening of 21 planned locations with a total area of ​​nearly 28 million square feet.

It is reported that Amazon notified the Maryland Department of Labor that it will close two delivery stations in Hanover and Essex starting next month. The two delivery stations employ a total of 353 employees, which means that these 353 employees will face unemployment. However, Amazon said that it will provide all employees with job opportunities to transfer to several different nearby delivery stations.

Amazon's massive warehouse closures this fall are in stark contrast to previous years, as Amazon typically rushes to open new warehouses and hire thousands of workers as it heads into the fall to prepare for the holiday shopping season. An Amazon spokesperson said it's common to close and open warehouses, or to explore multiple locations at once and adjust "based on the needs of the entire logistics network." Amazon weighs a variety of factors when deciding where to develop future sites to best serve customers.

Public data shows that since the outbreak of the global epidemic, consumer demand for online shopping has continued to rise. Amazon has doubled the size of its logistics network within two years of the outbreak. This rapid expansion has surpassed competitors and partners such as Walmart, United Parcel Service and FedEx. It is reported that for a period of time, Amazon opened a new warehouse somewhere in the United States approximately every 24 hours.

Today, Amazon’s chief executive has pledged to unwind some of that pandemic-era expansion, which has left the company with too much warehouse space and too many employees.

In the first quarter of this year, Amazon suffered a net loss of US$3.844 billion. Its chief financial officer said that with the emergence of the new coronavirus variant, many employees took leave and the company hired new employees to fill the vacancies. As the epidemic subsided in the late first quarter and the employees on leave returned, Amazon quickly went from being understaffed to overstaffed, resulting in lower productivity. This lower productivity increased costs by approximately US$2 billion compared to last year.

In the second quarter, although Amazon's total revenue reached $121.2 billion, a year-on-year increase of 7%, it was still in a loss state, with a loss of $2.028 billion. In order to reduce unnecessary labor costs and excess warehouse costs, Amazon has been subletting some of its warehouses, terminating some leases and delaying the construction of other warehouses to solve this problem. In addition, according to a previous report by E-net, from the first quarter to the second quarter of this year, Amazon's direct employees decreased by 99,000, a record high decline, mainly due to large-scale layoffs in Amazon warehouses and distribution centers.

MWPVL estimates that Amazon operates more than 1,200 logistics warehouse facilities of various sizes across the U.S. Although Amazon has been reducing labor and warehouse costs this year, it is difficult to measure how much excess capacity Amazon needs to solve. Some analysts believe that Amazon's additional capacity space will come in handy during the Christmas holidays.

Amazon's CEO said that despite the continued inflationary pressures on fuel, energy and transportation costs, progress has been made in controllable costs, especially improving the productivity of the fulfillment network. According to foreign media reports, despite delays and closures of Amazon's warehouse facilities, Amazon's plan to build a large distribution center in Niagara, New York is still moving forward. In addition, Amazon is currently building and developing dozens of fulfillment centers, sorting centers and delivery stations around the world.