business news in context, analysis with attitude

by Kevin Coupe

Bloomberg reports that Amazon "is stepping up a warehouse building spree, signaling the urgency of getting products to customers more quickly amid rising competition from eBay and Walmart."

What does this spree look like?

Amazon has spent almost $13.9 billion on 50 new warehouses since 2010, more than it spent since the company was founded. Amazon had 89 warehouses around the country at the end of last year, and will have five more operating at the end of 2013.

And here's perhaps the most important paragraph in the story:

"If Amazon can place fulfillment centers nearer to the top 20 U.S. metropolitan areas, the company could reach 50 percent of the U.S. population with same-day delivery, compared with 15 percent now, according to supply chain consultants MWPVL International. That would require only opening another 12 warehouses beyond those built and announced, the firm said."

Bloomberg continues: "The warehouse strategy carries risk. Fulfillment has become Amazon’s top operating expense, squeezing profit margins and contributing to a $39 million loss at the Seattle-based company last year. Yet Chief Executive Officer Jeff Bezos is under pressure to move more quickly as rivals including eBay and Wal-Mart devise their own faster ways to deliver products."

High risk, high reward. And same-day delivery to half the US population - including, quite possibly, groceries and even fresh food - has the potential of being a game changer.

At the very least, it is an Eye-Opener.
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