
Amazon Ramps Up $13.9 Billion Warehouse Building Spree - hkimura
http://www.bloomberg.com/news/2013-08-20/amazon-ramps-up-13-9-billion-warehouse-building-spree.html
======
cm2012
I enjoyed this article and found it illuminating. I work with a number of
manufacturers (in jewelry, apparel, furniture, watches, etc.) who sell using
Amazon Warehouses (the FBA program). Already, before the new warehouses, it
smokes competitor warehouses that I've tried in terms of time and reliability.
52% of Amazon non-media sales come from 3rd party sellers like the companies I
work for, last I checked.

Some trends I think will come soon from Amazon FBA:

1) When Amazon perfects daily grocery delivery it will change the whole
ballgame for UPS and USPS. Amazon will cut them out of the picture. I think
the cost of shipping furniture especially will plummet.

2) Amazon launched FBA Export a while back to let merchants fulfilling through
FBA U.S. ship anywhere in the world easily. Right now only a few SKUs are
eligible, but they are working to expand this program ASAP. In a year or two,
a ton of products on Amazon U.S. will be available anywhere.

3) A lot of mainstream people don't know but Amazon warehouses don't just ship
to Amazon customers. Merchants can enable multichannel shipping for a price
($6 compared to $2.50 for Amazon orders), so a lot of eBay sellers, Rakuten
sellers use FBA to fulfill.

~~~
stevenrace
As I followed Amazon's buildout over the years, I couldn't help but wonder why
FedEx is either overlooked in (or overlooking) this market.

I worked in one of these facilites many years ago, asked, and got mostly
shrugs.

Their 'Global Distribution Centers' offer 24/7, 365 fulfillment, and exclusive
'last minute' access to shipping hubs.

~~~
Element_
I was also curious about this, I assumed the competition between UPS and Fedex
was fierce enough to keep them both fairly innovative, but it sounds like
Amazon is finding room for improvement...

~~~
bpicolo
FedEx is about business documents mostly, as far as I know.

Not to mention, they're a middle man. Amazon gains a lot by cutting out the
middle man.

------
saosebastiao
> 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.

Not building warehouses carries more risk.

~~~
Swannie
39M USD loss is a token loss, too. Cost of building, staffing and operating a
warehouse is going to be far in excess of that.

------
JonFish85
From the Instacart CEO: "We don’t have to build warehouses, lease a fleet of
trucks or manage perishable inventory, which substantially reduces our
operational cost."

If they guarantee delivery in 2 hours and they don't have these costs, they're
paying someone else who has these costs, right? How can they really be a
competitor to Amazon, then? I have to think that Amazon is operating on such
razor-thin margins precisely because they think they can do a much better job
than using someone else.

~~~
samstave
I imagine that they are really the ___Uber_ __in this area... They provide a
good flexible service ontop of existing infrastructure at a premium cost to
users.

While that's just fine - I would love to see a service that lowers the cost to
me as a consumer for food.

Actually, let me rephrase that: I, personally, need a service that helps me
reduce the amount of food I waste. With a family of (5) in my household, we
waste a lot of food - and it drives me nuts.

I hope that something along the lines of Blue Apron could help me throw out
less/buy less.

~~~
_k
Not sure I understand. You want to eat less or have more food deliveries so
it's always fresh ?

~~~
samstave
I want to more closely buy the amount of ingredients required in what I would
use them for.

I would love to be able to shop based on meals - where I say "on Wednesday
night we are going to serve turkey meatloaf with broccoli and salad for 4
people" and understand the ingredients and proportions that match that.

I wind up having stuff rot because I only use a portion of it for whatever I
make, and I don't have a set menu so the food is random/too-often-the-same
etc...

I want the entire experience to be optimized.

~~~
zimbatm
Soup and probably other meals are traditionally used to recycle unused
ingredients and avoid that "always the same" feeling. It might be easier to do
that.

~~~
samstave
Agreed. and I am actually quite good at slowcooking stuff in my CrockPot.

Maybe I have just been too lazy? However, I am not 100% convinced that food is
not sold in the wrong proportions.

------
zeckalpha
Interesting that they complain about Amazon's operating margins. Isn't the
consensus that it is intentional?

~~~
notatoad
That's just what financial reporters do. Whether the margins are intentional
or not, they're still information that bloomberg readers want to know about.

~~~
zeckalpha
Bloomberg readers _should_ want to know why, rather than assuming that Amazon
is actually trying to increase it's profits, like most companies. It could
have been discussed in this article.

------
rogerbinns
I do wonder what is going on with Amazon shipping. For my orders over the last
year, by far the longest time is spent not shipping. The status will say
"shipping now" for several days. Once actually in package service it is quick.
I use the "free" shipping.

I'd guess that they process Prime members shipping before the free shipping.
And I'd suspect some of the waiting is time to ship from the manufacturers to
Amazon's warehouses. I also wonder if they transfer long tail items between
warehouses to consolidate orders. There is speculation that Amazon
intentionally delays free shipping orders to push people towards Prime. Maybe
they just have capacity problems?

By comparison with other vendors like Walmart I usually see shipping in less
than 24 hours.

Amazon forum complaining about slow shipping, people getting Prime stuff a lot
faster, no response from Amazon people:

[http://www.amazon.com/Super-Slow-
Shipping/forum/Fx4HQD057HT5...](http://www.amazon.com/Super-Slow-
Shipping/forum/Fx4HQD057HT5OQ/TxRFEIDS67V903/1/ref=cm_cd_pg_oldest?_encoding=UTF8&asin=B000MG3LDA&authToken=&cdSort=newest)

Giving credit to Prime members to accept slower shipping:

[http://www.geek.com/news/amazon-prime-customers-receiving-
cr...](http://www.geek.com/news/amazon-prime-customers-receiving-credit-for-
accepting-slower-shipping-1529819/)

Another random example complaint:

[http://www.pissedconsumer.com/reviews-by-
company/amazon/very...](http://www.pissedconsumer.com/reviews-by-
company/amazon/very-slow-free-shipping-and-delivery-20120718332793.html)

~~~
continuations
Agreed. Amazon's shipping service is very poor unless you use Prime.

I've bought from Amazon when I had a Prime subscription and when I didn't.
With Prime, the goods were always shipped within a day. Without Prime, they
let it sit on the shelf for 5 or 6 days before even shipping it.

Compare that to other companies like Best Buy, newegg, walmart, or even no
name ebay sellers where products are always promptly shipped without need for
any "subscription" nonsense.

~~~
saosebastiao
Would you rather it ship today and arrive a week from now? Or ship in 3 days
and arrive in 4? When you make your purchase, you are given a promised arrival
date...the ship date should be irrelevant.

~~~
continuations
False choice.

With Amazon, it sits on the shelf for 5 days before it ships and then takes
another 5 days to arrive.

With something like walmart, it ships immediately and then takes another 5
days to arrive.

Amazon's in-transit time isn't any faster than other merchants. They all use
UPS or Fedex, so no difference there. The only difference is that Amazon takes
5 days to ship while other websites take 1.

~~~
saosebastiao
Except that it is not a false choice at all. Amazon delivers by their promised
_delivery_ date. I have ordered items with my prime membership that took _two
days_ for it to ship, and yet it still arrived on time (arrived the same day
it shipped, via a same day carrier). A super saver shipping promise is 5-7
business days. If it takes 5 business days to ship, then your package is
getting a second-day ship method. From the several hundreds of packages I have
received from Amazon, both before and after my prime membership, only 1 has
ever arrived after it was promised to arrive...and it was the carrier's fault.

~~~
continuations
> Amazon delivers by their promised delivery date.

Except that there are alternatives to Amazon, hence my use of the word
"choice". I'm not saying Amazon doesn't keep its promise. I'm saying when
Amazon is compared to its competitors it falls short.

> A super saver shipping promise is 5-7 business days

Actually it's 5-8 business days
([http://www.amazon.com/gp/help/customer/display.html?ie=UTF8&...](http://www.amazon.com/gp/help/customer/display.html?ie=UTF8&nodeId=527692))
and usually Amazon milks it to its limit. 8 business days equal 10 to 12 real
days.

Compare that to merchants that ship immediately. It usually takes 3-5 days to
arrive at my home. That's a lot faster than Amazon's 10-12 days.

~~~
BillyMaize
Do competitors usually give that shipping for free though? I thought the point
of super saver shipping was you don't have to pay for the shipping but the
tradeoff is you have to wait however long it takes to get your package. If the
competitors are somewhat faster but you still have to pay then the scenarios
can't really be compared (I am a prime member so I have paid less than $1 per
delivery for guaranteed two day shipping so I have never even considered
alternatives).

~~~
continuations
Pretty much everyone offers some "free" shipping these days, which is just a
marketing scheme anyway. Free shippoing or not, the only number that matters
is the total, all-inclusive price. It's not uncommon for me to find a lower
total price at a seller that charges for shipping than the Amazon's "free"
shipping price.

WSJ actually just published an article on how Amazon is frequently underpriced
by other sellers:
[http://online.wsj.com/article/SB2000142412788732342380457902...](http://online.wsj.com/article/SB20001424127887323423804579023280029907354.html)

There's no one seller that is consistently the lowest price. But Amazon is
consistently the slowest in shipping.

------
ChuckMcM
It is an interesting vote against local manufacturing. There is a small number
of people who are betting that the 'future' won't be warehouses so much as
they will be small 'build on demand' factories which create the item you
ordered, when you order it. When you consider the 27.5yr depreciation life of
this sort of physical plant you might guess that Amazon is betting against
some sort of 'kindle' equivalent for goods (i.e. Shipping the information
rather than the good itself)

~~~
stevenrace
While I'm in favor of CNC'ing things on demand, it's doesn't scale very well.
Machine time adds up - multiple tooling, batch processes like
cleaning/finishing/painting,etc.

'The Market' seems to agree, as warehouse buildout (and purchasing) is booming
right now - as it seems more economical to produce things in large runs and
then hoard them in port cities like LA,New Orleans, Memphis, etc...

~~~
InclinedPlane
Nobody's attempted to build a fully automated, general purpose(ish) factory
yet. I'm sure there'll be plenty of complexities and limitations, but there
are limits and complexities with existing systems that we've just accepted as
"the way things are".

I'm fairly confident that general purpose automated manufacturing will become
a reality and will be transformative, but I doubt it will completely take over
the market. I'm pretty sure there'll be room for both.

------
mathattack
When you really need something, there is a premium for shipping within hours.
Whether it's diapers or a six pack of beer, speed matters. This is a huge
pivot from Amazon, which was previously won on price and size of catalogue.

Note - If Amazon gets licensed for beer and can deliver it in hours, game over
for a lot of players!

~~~
wikwocket
Also for diapers... I know you were being facetious, but speaking as a parent,
a company that can deliver diapers and formula within a few hours is going to
get a lot of immediate attention and devotion!

~~~
tgcordell
Amazon provides the subscribe and save service to fill this need. You can set
up the frequency of delivery and the quantity of units and never have to
worry. They give you a nice discount on the order if you do it this way as
well

~~~
wikwocket
Clearly you are only passingly familiar with young children. ;) As @mathattack
implies, one cannot predict an infant's near-future need for diapers with the
same confidence with which one can predict e.g. when a furnace filter needs
changing.

------
snarfy
If they didn't spend the money on growth it would count as profit and they'd
have to pay taxes on it.

------
atopuzov
One more proof that Amazon is a retail company and not a technology company
(only technology is allowed is for the retail sake).

------
hkimura
Yeah, slow and steady growth...

~~~
ceejayoz
Amazon's never been about "slow and steady" growth. They've been about long-
term growth at the expense of short-term profit.

~~~
ihsw
Or, more to the point, using their dominance and abundance against their
competitors. They may have razor thin margins, but that's only because they're
leveraging their pricing to cut into the margins of their competitors.

Lower prices here and there, raise them elsewhere to offset the cost. Their
accounting department definitely has to be kept on their toes, especially to
make sure things don't fly off the handle _too_ much.

~~~
chris_mahan
Amazon: Fast, Cheap, and Good: Pick all three.

They've really delivered. I've tried to not like Amazon, but they keep
impressing with their fast service, availability, low price.

~~~
g4m8i7
Exactly. When Rise of the Warrior Cop came out, I wanted to pick it up on
release day. None of the local bookstores had it in stock, but all were happy
to order it for me. It would have taken them all 4-5 business days.

I went to Amazon that night, and with Prime, I got it in 2 days, for about $10
less than the local brick and mortar stores.

How can anyone compete with that? Especially if they build out their same-day
service?

~~~
ericd
Yeah, I think same day will strike a complete death blow for retail if they
can pull it off well.

