Amazon closes, abandons plans for dozens of US warehouses

(Bloomberg) — Amazon.com Inc., determined to downsize its sprawling delivery operation amid slowing sales growth, has abandoned dozens of existing and planned U.S. facilities, according to a closely watched consulting firm.

Most Read by Bloomberg

MWPVL International Inc., which tracks Amazon’s real estate footprint, estimates the company has either closed or killed plans to open 42 facilities totaling nearly 25 million square feet of usable space. The company has delayed opening an additional 21 locations, totaling nearly 28 million square feet, according to MWPVL. The e-commerce giant has also canceled a handful of European projects, mostly in Spain, the company said.

Just this week Amazon warned officials in Maryland that it plans to close two delivery stations next month in Hanover and Essex, near Baltimore, that employ more than 300 people. The moves are in stark contrast to previous years, when the world’s largest e-commerce company typically entered the fall rushing to open new facilities and hire thousands of workers to prepare for the holiday shopping season. Amazon continues to open facilities where it requires more space to meet customer demand.

“There are some serious cuts to be made before the end of the year — in North America and the rest of the world,” said Marc Wulfraat, MWPVL founder and president. “Having said that, they continue to go live with new installations this year at an amazing rate.”

Maria Boschetti, an Amazon spokeswoman, said it’s common for the company to explore multiple locations at once and make adjustments “based on needs across the network.”

“We weigh a variety of factors when deciding where to develop future sites to best serve customers,” he said in an emailed statement. “We have dozens of fulfillment centers, sorting centers and delivery stations under construction and development around the world.”

The Maryland closing is part of an initiative to shift work to more modern buildings, Amazon says. “We regularly look at how we can improve the experience for our employees, partners, drivers and customers, and that includes upgrading our facilities,” Boschetti said. “As part of this effort, we will be closing the delivery stations in Hanover and Essex and offering all employees the opportunity to transfer to several different delivery stations nearby.”

CEO Andy Jassy has pledged to unwind some of a pandemic-era expansion that saddled Amazon with too much warehouse space and too many employees. The company has typically weaned its hourly ranks by leaving vacancies open, slowing hiring and tightening disciplinary or productivity standards. But warehouse closings are also part of the mix, and workers are bracing for more. During the second quarter, Amazon’s workforce shrank by about 100,000 jobs to 1.52 million, the largest quarter-on-quarter decline in the company’s history.

The Seattle company is also looking to sublease at least 10 million square feet of storage space, Bloomberg reported in May.

When home-delivery shoppers started playing online during the pandemic, Amazon responded by doubling the size of its logistics network over a two-year period, a rapid growth that outpaced that of rivals and partners such as Walmart Inc. United Parcel Service Inc. and FedEx Corp. For a while, Amazon opened a new warehouse somewhere in the US roughly every 24 hours. Jassy told Bloomberg in June that the company had decided in early 2021 to move toward the higher end of its forecast for buyer demand, erring on the side of having too much warehouse space rather than too little.

Wulfraat said most of the closings announced this year are drop-off stations, smaller buildings that deliver prepackaged items to drivers. The canceled facilities include several planned fulfillment centers, giant warehouses containing millions of items. MWPVL estimates that Amazon operates more than 1,200 logistics facilities, large and small, across the US.

More belt-tightening could complicate Amazon’s already fraught relationship with organized labor. Earlier this year, a labor union started by a fired Amazon worker won a historic victory at a company warehouse in Staten Island, New York. A federal labor official on Thursday rejected Amazon’s attempt to overturn the result. Last month, workers at an Amazon facility near Albany, New York, petitioned to hold union elections there.

How much excess capacity Amazon needs to deal with is hard to gauge, and some analysts believe the extra space will come in handy during the Christmas holiday season.

(Updated with additional Amazon commentary beginning in the fifth paragraph.)

Most Read by Bloomberg Businessweek

©2022 Bloomberg LP

Leave a Reply

Your email address will not be published. Required fields are marked *