Daily Insights

Amazon’s Well-Oiled Machine

By: Lakshmi Kalluri | May 09, 2019

Amazon Prime is launching a range of features, but the most frequently used? Two-day shipping, according to Gartner’s Cultural Attitudes and Behaviors Survey. It’s not surprise that in Amazon’s Q1 earnings call, the retail giant announced a planned $800 million investment in developing one-day shipping capabilities.  

Given the size of Amazon’s logistical operation, the e-tailer has a detailed network of warehouses running around the clock to keep the company in prime condition. Amazon had 139 active fulfillment centers as of April, according to Gartner L2’s Amazon Consumer report, with an additional 31 scheduled to launch across 2019 and 2020.

As Amazon pushes to expand its one-day shipping capabilities, it’s doubling down on its existing fulfilment network. In 2019, fulfillment centers in Ohio and New York will double to support Amazon’s one-day delivery capabilities, and in 2020 Idaho and Alabama will launch their first Amazon warehouses. Over half of these buildings are slated to be ‘small sort’ warehouses that carry items most frequently eligible for Prime shipping, like apparel and electronics.

As 54% of Prime subscribers are based in the suburbs, much of Amazon’s logistical network is geared toward supporting this demographic. California, New Jersey, New York, and Pennsylvania have the highest concentration of fulfillment centers to support the two most densely populated US regions, accounting for nearly 27% of Amazon warehouses.  Expanding its fulfillment network into states with large ‘small town’ and ‘rural’ populations allows Amazon to deliver on its promises of two-day shipping to the 23% of subscribers that live in these comparatively underserved locales. Rural geographies seem to be the next area of expansion for Amazon, and retailers looking to tap into these demographics would be wise to monitor the e-commerce behemoth’s warehouse expansion.

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