With dwindling sales growth, Amazon.com Inc. is reducing the size of its massive operations. The company has abandoned its plans for new facilities and closed the existing ones.
According to consultancy firm MWPVL International Inc. which keeps track of Amazon’s real estate footprints, the retail e-commerce giant has dropped plans or shuttered 42 facilities covering around 25 million square feet of space. Amazon has delayed opening another 21 locations covering 28 million square feet. It has also canceled a few projects in Europe, mostly in Spain.
Last week Amazon warned Maryland officials they were closing delivery stations in Essex and Hanover near Baltimore next month. These units employ 300plus people. The downsizing moves sharply contrast to when Amazon rushed to open new facilities in the previous years and hired thousands of employees for the Holiday shopping season. However, it continues to open new facilities strategically to meet customer demands.
According to an Amazon spokesperson, Maria Moschetti, exploring multiple locations and new opportunities is common depending on the network’s requirements.
She said that amazon looks at several factors when setting up new facilities. The company has many sortation centers, fulfillment centers, and delivery stations under construction and evolving globally.
Amazon says closing the Maryland facilities ensures shifting work to modern buildings. The idea is to improve employees, customers, partners, and drivers’ experience, including upgrading facilities. Closing the Essex and Hanover delivery stations will allow existing workers to shift to nearby delivery stations.
Expansion Reversal
Andy Jessy, CEO of Amazon, has promised to unwind the expansions during the pandemic that saddled the company with excess warehouse space and surplus employees. The company has slowed hirings and kept open vacant positions, tightening productivity norms and disciplinary standards.
Closing warehouses is a part of the new strategy, and workers anticipate more downsizing.
The second quarter saw Amazon shrinking its workforce by around 100,000 jobs to 1.52 million. This was the biggest contraction on a quarter-to-quarter basis in the history of Amazon.
The Seattle-based company is also looking at sub-leasing out around 10 million square ft of warehouse space, as reported by Bloomberg News in May.
During the demand by online shoppers during the pandemic, Amazon doubled its logistic network over the next two years. It surpassed Walmart Inc, FedEx Corp., and United parcel service Inc. The company erred on the side of building too many warehouses space than having too few.
Most of the closings were smaller buildings that handled packaged deliveries to drivers. Facilities that are aborted include giant warehouses and fulfillment centers. MWPL estimates Amazon has more than 1200 large and small logistics centers around the US.
The risk of downsizing by Amazon involves complicating relations with organized union labor. A labor union won a recent victory at the warehouse of Amazon in Staten Island.
