2 min read.Updated: 06 Dec 2021, 05:51 PM ISTDan Gallagher, The Wall Street Journal
Massive expansion of fulfillment network puts e-commerce giant in prime position for later shoppers
Amazon.com hasn’t had the merriest of holiday seasons yet. But the e-commerce giant is in a better position than ever to help shoppers who didn’t get on the ball early.
Online shoppers spent about $33.9 billion during so-called Cyber Week—the period from Thanksgiving Day through Cyber Monday—according to tracking from Adobe. That is down 1.4% from the same period last year. There isn’t a pattern of shoppers choosing bricks over clicks; the National Retail Federation reported that traffic to retail stores was down 3.4% from 2020 for the same period. Rather, more shoppers seem to have gotten out early. Adobe’s data showed total online spending up nearly 12% to $109.8 billion for the period of Nov. 1 to Nov. 29 compared with the same period last year.
Still, concerns about Amazon’s vital holiday season have weighed on the stock, which is down more than 8% since the start of the Thanksgiving week compared with a 3% drop for the S&P 500 in that time. The pandemic gave many other retailers a chance to step up their online game. Shopify, which helps power the e-commerce services of many of those competitors, reported $6.3 billion in sales by its merchants for the Black Friday-Cyber Monday period—a 23% jump from last year. Amazon’s own holiday sales release for the period was characteristically free of useful data; the company only said Black Friday and Cyber Monday were “record-breaking." Truist analyst Youssef Squali projects that Amazon will lose about 1 percentage point of share of e-commerce sales volume this holiday season.
One thing Amazon’s rivals don’t have, though, is a massive fulfillment network that is getting more massive by the day. The company is projected to add a record 625 facilities to its fulfillment network this year alone, according to data from logistics consultant MWPVL International. That would bring its total facilities globally to more than 2,000. MWPVL President Marc Wulfraat says 24 facilities due to come online in 2021 are designed for same-day delivery—which would triple the number of facilities Amazon had in place for this purpose before this year.
The ability to get products to consumers quickly will likely be useful as the holiday season progresses. Not all shoppers heeded the frequent advice to make purchases early to avoid shipping delays and product shortages. And there are some early signs that supply constraints may be easing; the Institute for Supply Management reported last week that supplier delivery times came down in November from their October level. Consumers may also turn back to more online shopping if growing cases of the new Omicron Covid-19 variant prompt second thoughts about venturing into stores.
Amazon also wisely set itself a low bar. In its last earnings report in late October, the company projected fourth-quarter sales would rise between 4% and 12% year over year in the fourth quarter. That would amount to the slowest growth Amazon has seen since 2001, according to data from S&P Global Market Intelligence. A few more clicks from late shoppers could go a long way.