Amazon is aggressively expanding its same-day delivery capabilities, after a major pullback in planned fulfillment facilities which overshot demand when the pandemic boom receded, redirecting its investments toward smaller hubs closer to customers, the Wall Street Journal reported.
Amazon is feeling the heat from competitors, primarily Walmart and Target but also ecommerce platforms like Shopify and Instacart, as its delivery SLAs have been impacted. These companies aren’t slowing down in their push toward rapid fulfillment and delivery. And the arms race to win over eager consumers in key markets continues unabated, even as overall ecommerce demand has eased.
Target, for example, is investing $100 million to expand its network of automated sortation centers to more than 15 by 2026, in support of its last-mile network and same-day delivery. Walmart, meanwhile, is growing its GoLocal outsourced delivery service, including through a new partnership with Salesforce, and advertising it in the widely read NRF SmartBrief.
Amazon CEO Andy Jassy emphasized improving speed to customer as a top priority in 2023 during a Q4 earnings call at the beginning of February. “We believe that continuing to get products to customers faster, makes customers happier, and they also convert at a higher rate when they can see promises of deliveries that are faster,” Jassy said.
In a very tiny sample size of Fairfield County, CT, the smiley vans of Amazon contractors fill roadways throughout the region from same-day sites in Monroe and Stratford; there are likely several others. They fan out daily and at all hours to meet the voracious appetites of Prime members in this corner of the Nutmeg State.
In a related announcement, Amazon said it is investing $200 million in safety technology across its transportation network. Plans include the addition of equipment for automatic emergency braking, front-collision warning and lane-departure warning in its middle-mile tractor-trailers, and in-vehicle safety cameras in last-mile vehicles.
According to MWPVL International, a noted tracker of Amazon’s fulfillment empire, the company plans to expand its current network of 45 so-called same-day sites to more that 150 in the coming years, the WSJ reported. Amazon said it has recently opened such facilities in Los Angeles, San Francisco and Phoenix, serviced by its army of independent contractors in sprinter vans.
Amazon, which charges $2.99 for same-day delivery orders under $25, is trying to make the unit economics of the expensive last mile work. Marc Wulfraat, president of MWPVL, estimates it costs Amazon $3.30 per package on average to deliver from same-day sites, vs. $1.75 from traditional fulfillment centers. Those costs can go down as the local network expands.