This is an interesting article about Amazon's delivery network, which is now the 4th largest in the United States. Here are the numbers (most of which are as of 2019):
Since 2014, Amazon has spent $39 billion building out its delivery network. When you add in warehouses and airplanes, this number increases to about $60 billion. As of 2019, Amazon leased 97% of its fulfillment and data center spaces.
Amazon is becoming increasingly vertically integrated. Last year, Amazon delivered about 58% of the 4.5 billion parcels that it shipped to US consumers. This represents about 22% of all online retail deliveries.
Outside of the US, Amazon still handles close to 50% of its own order deliveries. By 2025, Bank of America Global Research is predicting that Amazon could grow to handle somewhere between 38% and 49% of all online order deliveries in the US.
Amazon is the 4th largest in terms of US package deliveries (2019), behind FedEx, UPS, and USPS (in that order).
Amazon's fulfillment network roughly entails: receiving centers -> fulfillment centers -> sortation centers -> last-mile delivery stations. It's a hub and spoke system with the physical real estate naturally getting smaller as you get closer to the end destination. For a lot more information on their network,
This is an interesting article about Amazon's delivery network, which is now the 4th largest in the United States. Here are the numbers (most of which are as of 2019):
Since 2014, Amazon has spent $39 billion building out its delivery network. When you add in warehouses and airplanes, this number increases to about $60 billion. As of 2019, Amazon leased 97% of its fulfillment and data center spaces.
Amazon is becoming increasingly vertically integrated. Last year, Amazon delivered about 58% of the 4.5 billion parcels that it shipped to US consumers. This represents about 22% of all online retail deliveries.
Outside of the US, Amazon still handles close to 50% of its own order deliveries. By 2025, Bank of America Global Research is predicting that Amazon could grow to handle somewhere between 38% and 49% of all online order deliveries in the US.
Amazon is the 4th largest in terms of US package deliveries (2019), behind FedEx, UPS, and USPS (in that order).
Amazon's fulfillment network roughly entails: receiving centers -> fulfillment centers -> sortation centers -> last-mile delivery stations. It's a hub and spoke system with the physical real estate naturally getting smaller as you get closer to the end destination. For a lot more information on their network,
According to Amazon's recent annual 10-K filing, the company leased and owned (most of their space is leased) about 288,419,000 square feet of space around the world at the end of 2018. Of this number, about 80% is used for "fulfillment, data centers, and other." Amazon doesn't break out this line item any further, but GeekWire reckons that a good 3/4 of their real estate is dedicated to their fulfillment warehouses.
Here's the full summary of their facilities (from the 10-K filing):
Given that fulfillment is such a large share of their properties, I am most interested in understanding the geography of their warehouses and how that impacts their core value proposition, which is largely all about convenience.
In the early days of online retail, the decision of where to warehouse had meaningful tax implications. Because (in most cases in the US?) you only had to collect sales tax if you had a physical presence in the same location as your purchasers.
As that changed, it then made more sense to create a broader distribution network and minimize the distance between fulfillment center and purchaser. By 2016, Bloomberg estimated that nearly 78 million Americans lived in a zip code where Amazon offered free same-dame delivery. That number has obviously increased since.
And in the paper "Economies of Density", they discovered the following cost savings as a result of Amazon's growing fulfillment network:
We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.
The interesting question for real estate people and city builders -- which is brought up in the Knowledge@Wharton podcast but is difficult to answer -- is whether there are diminishing returns to this "economies of density" phenomenon. In other words, how dense does Amazon's fulfillment network want to be?
According to Amazon's recent annual 10-K filing, the company leased and owned (most of their space is leased) about 288,419,000 square feet of space around the world at the end of 2018. Of this number, about 80% is used for "fulfillment, data centers, and other." Amazon doesn't break out this line item any further, but GeekWire reckons that a good 3/4 of their real estate is dedicated to their fulfillment warehouses.
Here's the full summary of their facilities (from the 10-K filing):
Given that fulfillment is such a large share of their properties, I am most interested in understanding the geography of their warehouses and how that impacts their core value proposition, which is largely all about convenience.
In the early days of online retail, the decision of where to warehouse had meaningful tax implications. Because (in most cases in the US?) you only had to collect sales tax if you had a physical presence in the same location as your purchasers.
As that changed, it then made more sense to create a broader distribution network and minimize the distance between fulfillment center and purchaser. By 2016, Bloomberg estimated that nearly 78 million Americans lived in a zip code where Amazon offered free same-dame delivery. That number has obviously increased since.
And in the paper "Economies of Density", they discovered the following cost savings as a result of Amazon's growing fulfillment network:
We find that Amazon saves between $0.17 and $0.47 for every 100-mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers.
The interesting question for real estate people and city builders -- which is brought up in the Knowledge@Wharton podcast but is difficult to answer -- is whether there are diminishing returns to this "economies of density" phenomenon. In other words, how dense does Amazon's fulfillment network want to be?
Not surprisingly, the article talks a lot about Amazon, including their 4th warehouse in the Greater Toronto Area, which is an 850,000 square foot facility in Brampton equipped with 350-pound robots (8050 Heritage Road).
The first thing I did after reading the article was figure out the location of all of Amazon’s fulfillment centers in the GTA. Amazon doesn’t seem to publish this. But according to TaxJar, they are here (I mapped out the addresses):
There are two in Brampton at the precise location where Hwy 407 (toll route) and Hwy 401 meet. The other three are distributed along Hwy 401 in Milton and in Mississauga.
- In 6 years, Amazon has leased over 2 million square feet of warehouse space in Canada.
- Toronto is the third largest warehouse market in North America. It represents 43% of Canada’s total inventory.
- Average net rents have increased 9.7% over the past year and vacancy rates have dropped to 2.7% (CBRE data). In Vancouver, those same numbers are 5.1% and 3%, respectively.
- Online shopping is thought to account for about 6.5% of all retail sales in Canada. But in Toronto, 23% of all industrial space is already e-commerce-related (CBRE data, again).
- CBRE believes that every $1 billion in new online sales per year requires an additional 1.25 million square feet of warehouse space.
- Based on online sales projections, Canada needs another 27.5 million square feet of industrial space over the next 5 years. We don’t have that much space in the pipeline.
- Clear heights are increasing for stacking purposes. Amazon’s new Brampton facility is 45 feet tall / 4 floors. 10 years ago new warehouses were 26 feet tall.
- Average sale price of warehouses in the GTA has gone from $119.35 psf to $142.19 psf over the last year.
Perhaps the most interesting takeaway from the article is the discussion around “last mile” distribution hubs. These are fulfillment centers located closer to the city, which are used to offer shorter delivery times:
“…instead of having inventory stored for days or months, these fulfilment centres will turn over their inventory in one day, sometimes twice a day.”
This is something that I addressed in my recent presentation about the “mall of the future” at B+H’s retail design charrette. Where do these physical distribution centers want to be as online sales continue to grow and delivery times continue to compress? Where’s the future growth?
According to this article, it’s going to be in “last mile” fulfillment real estate – relatively smaller spaces that are located very close or directly in the city center.
Not surprisingly, the article talks a lot about Amazon, including their 4th warehouse in the Greater Toronto Area, which is an 850,000 square foot facility in Brampton equipped with 350-pound robots (8050 Heritage Road).
The first thing I did after reading the article was figure out the location of all of Amazon’s fulfillment centers in the GTA. Amazon doesn’t seem to publish this. But according to TaxJar, they are here (I mapped out the addresses):
There are two in Brampton at the precise location where Hwy 407 (toll route) and Hwy 401 meet. The other three are distributed along Hwy 401 in Milton and in Mississauga.
- In 6 years, Amazon has leased over 2 million square feet of warehouse space in Canada.
- Toronto is the third largest warehouse market in North America. It represents 43% of Canada’s total inventory.
- Average net rents have increased 9.7% over the past year and vacancy rates have dropped to 2.7% (CBRE data). In Vancouver, those same numbers are 5.1% and 3%, respectively.
- Online shopping is thought to account for about 6.5% of all retail sales in Canada. But in Toronto, 23% of all industrial space is already e-commerce-related (CBRE data, again).
- CBRE believes that every $1 billion in new online sales per year requires an additional 1.25 million square feet of warehouse space.
- Based on online sales projections, Canada needs another 27.5 million square feet of industrial space over the next 5 years. We don’t have that much space in the pipeline.
- Clear heights are increasing for stacking purposes. Amazon’s new Brampton facility is 45 feet tall / 4 floors. 10 years ago new warehouses were 26 feet tall.
- Average sale price of warehouses in the GTA has gone from $119.35 psf to $142.19 psf over the last year.
Perhaps the most interesting takeaway from the article is the discussion around “last mile” distribution hubs. These are fulfillment centers located closer to the city, which are used to offer shorter delivery times:
“…instead of having inventory stored for days or months, these fulfilment centres will turn over their inventory in one day, sometimes twice a day.”
This is something that I addressed in my recent presentation about the “mall of the future” at B+H’s retail design charrette. Where do these physical distribution centers want to be as online sales continue to grow and delivery times continue to compress? Where’s the future growth?
According to this article, it’s going to be in “last mile” fulfillment real estate – relatively smaller spaces that are located very close or directly in the city center.
