Amazon has been expanding its delivery services for years as it seeks greater control over the distribution and delivery of retail goods. What would it take for the company to stage a full-scale coup and become the world's biggest delivery service?
Amazon prizes space to store, sort and ship packages -- and square footage at its distribution facilities is comparable to that of other major retailers like Target and Wal-Mart. Its facilities are much larger than UPS and FedEx, because those two companies deliver goods (rather than stocking them) and therefore need less space.
Amazon’s distribution center growth has slowed slightly as sales catch up to storage space, but the company still maintains a huge storage footprint. It added 17 million square feet (or more than six Freedom Towers worth) of distribution space last year alone. Capitalized leases account for more than half of Amazon’s $17.5 billion of debt and most of the property it leases is for processing retail transactions.
According to Amazon's latest earnings call, about half of the company's vendors now use Fulfillment by Amazon, which offers users turn-key pick-up, packing and shipping services. So expect Amazon's investment in distribution centers to continue.
In the U.S., Amazon has 72 distribution centers, which include fulfillment and sorting centers as well as AmazonFresh hubs. Amazon says it has same-day delivery in 16 cities, and 23 cities that offer the company's Prime Now delivery service.
Amazon’s Flex delivery -- an Uber-like service deploying drivers with their own cars and phones to make urban deliveries -- is available in several major metro areas already and is coming soon to New York, Chicago, and Portland.
Although nearly half of Amazon’s fulfillment centers are in the U.S., it is acquiring stakes in delivery companies overseas (such as France’s Colis Privé and the United Kingdom’s Yodel). The Seattle Times reported late last year that Amazon was considering leasing 20 Boeing 767 jets to use for deliveries. Amazon declined to confirm or deny that report. If the company secures those planes, its fleet would still be much smaller than those of competitors like FedEx and UPS.
For now, Amazon’s ground delivery aspirations, aided by what the company described as “thousands” of trucks leases, seem to have more traction than anything it's doing in the skies or overseas.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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