The e-commerce giant delays openings of newest fulfillment centers for up to two years.
Before the pandemic, the most reliable barometer of regional economic growth was an announcement that Amazon would be building a new fulfillment center and bringing a minimum of 1,000 new jobs to a community.
During the pandemic, the pace of these announcements sped up, as Amazon nearly doubled the size of its distribution network. The e-commerce titan voraciously added to its leased industrial space, acquiring a total of more than 370M SF, and accelerated its development program to build new fulfillment centers across the US.
Now, facing an economic downturn with an overextended logistics network that has millions of square feet of unneeded space, Amazon is telling locations that were expecting to cut the ribbon this year on a new fulfillment center that the completed warehouses may not open for up to two years.
In Davenport, IA, part of the Quad Cities region that straddles the Mississippi River, a brand-new five-story Amazon warehouse stands ready for business as originally scheduled in September. Two weeks ago, Amazon told the Iowa city that the opening of the fulfillment center will be delayed until at least 2024.
“We’re still excited to launch this new facility in Davenport, though we’ve had to adjust our timing,” Caitlin Polochak, an Amazon spokesperson, told ABC’s WQAD8 affiliate.
“We look forward to sharing new timing along with information about the great jobs, pay—starting at $16/hour—and comprehensive benefits we’ll be offering just as soon as we can,” Polochak added.
Earlier this week, the San Antonio Express reported that Amazon is postponing the opening of the $200M East Side fulfillment center in the Texas metro.
At locations across the country, Amazon is repeating the same message, which boils down to this: we’re still committed to having a warehouse here and we’ll finish the building as scheduled, but we won’t be hiring anyone anytime soon.
In Alcoa, TN, the first of two fulfillment centers Amazon is building in Blount County—known in the county as “Project Pearl”—was scheduled to open last month. Amazon has informed Blount Partnership, the regional economic development agency, that the Alcoa warehouse opening is being delayed until June 2023.
According to Bryan Daniels, CEO of Blount Partnership, Amazon has promised to complete the construction phase of Project Pearl according to the original schedule.
According to reports, Amazon is telling locations with new, unopened warehouses that it won’t open a new distribution facility unless it has enough product moving through the operation to use it at capacity. Amazon is citing lingering supply chain issues as well as slower-than-expected e-commerce growth as factors exacerbating its need to cull extra logistics space.
“It all comes down to the supply chain. It’s hard to bring on facilities when you can’t get all the product in to fill them. And we’re all experiencing that now across all our industries, so we understand that,” Daniels said, in an interview with The Daily Times, a local newspaper.
In a Q1 earnings call, Amazon CFO Brian Olsavsky disclosed that the e-commerce giant lost nearly $4B during the first quarter, its first quarterly loss since 2015. Olsavsky conceded that Amazon had overestimated the rate of e-commerce growth, noting that the company’s unmatched logistics network now has too many warehouses with too many workers.
In March, before the Q1 earnings call, officials in Churchill, PA were abruptly informed by Amazon that it was canceling its plan to build a huge distribution center on the 133-acre site of the former George Washington Research Park—less than three months after Amazon had sought and received approval from the local government to go ahead with the project.
Earlier this month, Amazon informed planning officials in the Austin, TX suburb of Round Rock that it is putting “on hold indefinitely” a $250M fulfillment center the company was planning to build on a 193-acre site an Amazon subsidiary purchased for development in November, GlobeSt.com reported.
According to a report in Bloomberg, the e-commerce giant intends to reduce its footprint of leased industrial space by as much as 30M SF by subleasing some of the space or by terminating some leases.