09/17/2020

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Amazon’s Move to the Suburbs



Amazon Plans to Open 1,000 New Delivery Centers

Amazon (AMZN) is growing its presence in suburban neighborhoods, packing them with new warehouses and blue delivery vans. The company plans to open 1,000 delivery centers around the country. Earlier this week, Amazon also announced that it is hiring 100,000 new workers in the US and Canada. So far this year, the company has added 308,000 new people to its workforce.

As Amazon builds its delivery network, it is becoming less reliant on shipping partners like UPS. Amazon will handle the deliveries of about 67% of its own packages this year and eventually hopes to scale up to doing 85% of its own shipping.

Keeping Up With Traditional Retailers

When the pandemic first hit the US, Amazon experienced a rush of orders and had trouble keeping up. As people stocked up on cleaning products, home office supplies, and more, Amazon struggled with inventory shortages and shipping delays. Between January and June, Amazon’s share of US online retail dropped from 42.1% to 38.5%. Meanwhile, Walmart’s (WMT) ecommerce market share went from 2.2% to 3.5% and Target’s (TGT) rose from 3.5% to 5.0%.

Companies like Target and Walmart have been able to leverage their brick-and-mortar stores in locations across suburban America to help with their ecommerce operations. Now, Amazon is doing all it can to expand in the suburbs. The company wants to make sure it stays ahead of traditional retailers expanding their ecommerce operations—especially as Walmart rolls out Walmart+, a subscription service similar to Amazon Prime.

Looking Toward an Unconventional Holiday Season

Many are looking ahead at what will be an unconventional holiday shopping season. People will probably travel less and do less in-person shopping, which will likely lead to an ecommerce spike.

Amazon is planning a Prime Day soon, and while it has not released a date yet, many expect it will be sometime in early October—which could be a way to help get consumers in the holiday shopping spirit early. Investors will be curious to see if Amazon’s move to the suburbs pays off.


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