Amazon doubled down on its commitment to expand supply chain capacity on its latest earnings call. In 2020, Amazon’s capital expenditures were more than three times greater than those of Walmart. Retaildive reports about it. In 2020, Amazon upped its spending as it works to stand up more delivery stations and fulfillment centers.
Amazon fulfillment increased further to now 30,4 percent of product sales. Coming from less than 12 percent in 2011. An increase of 2 percent points a year! Scale doesn’t deliver?
One of the biggest competitive advantages of an omnichannel retailer is the ability to get online orders to consumers quickly and efficiently. Often that means delivering to a shopper’s home, but more often it might mean the shopper picking up an order themselves at one of the retailer’s stores. In an omnichannel world, having the infrastructure to serve customers when they want to be served, how they want to be served, is a key differentiator. Omnichannel retailers benefit from the proximity of delivery operations.
Amazon CFO Brian Olsavsky explains the investment is important in helping the company realize its one-day delivery ambitions: “Most of our one-day costs are really what we’ve done to our logistics networks to allow for one-day shipping,” Olsavsky said last year. “Things like putting inventory closer to the customer, things like building up our delivery network and also having multiple pull times and shipping windows during the day.”
As Amazon adds sorting centers and delivery stations, it gets closer to more of the U.S. population. In 2018, 51% of the U.S. population was within a 60-minute drive of an Amazon delivery station, which grew to 77% of the U.S. population by 2021. FedEx, UPS, and the USPS have distribution networks that can reach at least 98% or more of the U.S. population within 60 minutes. Amazon is also playing catchup to Walmart and Target, which have store networks that can reach 99% and 94% of the U.S. within 60 minutes.