Amazon's next move could reshape how America shops — all over again
Bloomberg/Getty Images
- Amazon wants to build more than 1,000 same-day delivery facilities by 2031.
- The plan would put same-day hubs within 10 miles of most Amazon Prime customers in the US.
- The expansion could challenge Walmart's physical delivery advantage, and change shopping habits.
Amazon is plotting an unprecedented expansion of its same-day delivery operation that could redraw the map of American retail and take on Walmart's biggest advantage in everyday shopping.
The initiative, codenamed Project Mercury, would expand Amazon's same-day fulfillment network to more than 1,000 locations by 2031, an increase of more than tenfold from the roughly 85 facilities the company operates today, according to internal planning documents reviewed by Business Insider.
The effort will cost billions of dollars and could reshape how Americans shop for everyday items such as fresh food, paper towels, and cough medicine.
Walmart, with thousands of huge stores close to most US consumers, has dominated this valuable, sticky market. Amazon is betting it can rewrite the rules of everyday retail by moving inventory dramatically closer to customers through hundreds of new Same Day Fulfillment Centers, or SSDs, which stock its 90,000 most popular products.
"Transformational"
One document described Project Mercury as a "transformational initiative to reshape the Same-Day Delivery network."
The project fundamentally redesigns this network around shorter distances. Amazon currently puts these same-day facilities about a 90-minute drive from customers. Now, it aims to put SSDs within a 10-mile straight-line radius of 80% of Prime subscribers in the US by 2031, according to the documents.
An Amazon spokesperson told Business Insider that internal projections are "preliminary, subject to significant revision, and shouldn't be treated as finalized plans." Amazon's same-day network currently serves more than 10,000 cities and towns, including rural communities, the spokesperson added, though same-day orders aren't exclusively fulfilled through SSD facilities.
"That said, it's no secret that we're focused on delivering faster for customers and the expansion of our same-day delivery network is playing a big role in that," the spokesperson said. "We continue to invest in fast delivery speed and convenience alongside wide selection and everyday low prices."
Taking on Walmart's physical advantage
The plan could help Amazon attack one of Walmart's biggest advantages in the fight over groceries and other everyday purchases: physical proximity to customers.
Roughly 90% of the US population lives within 10 miles of a Walmart or Sam's Club, giving the retailer thousands of stores that double as local fulfillment hubs. Walmart says 95% of US households can now receive delivery in under three hours.
Amazon has been attacking the problem from several directions. Business Insider previously reported on Project Kobe, Amazon's plan for Walmart-sized stores with large automated backrooms that could fulfill online orders and function as local-delivery hubs.
Amazon is also testing an all-day delivery model with 10 overlapping delivery windows, while expanding Amazon Now, its ultrafast service for everyday essentials, and using SSDs as launch points for its drone delivery service Prime Air.
Amazon's worry
In some regions, Amazon has expressed concern about its lack of really fast delivery speeds, and how that undermines efforts to gain more retail market share.
In Canada, an internal planning document noted that major retailers were "outpacing our delivery capabilities," citing investments by Walmart and Best Buy.
Mercury takes a different approach. Instead of replicating Walmart's store network, Amazon would build a much denser web of specialized fulfillment centers designed to get popular inventory closer to customers.
That proximity is increasingly important as Amazon pushes deeper into groceries and everyday essentials. Amazon says its grocery business now generates more than $150 billion in annual gross sales, though that includes nonperishable products beyond traditional fresh grocery. Walmart's grocery business is much bigger.
Bloomberg/Getty Images
A smaller warehouse for a bigger network
Mercury would require Amazon to build hundreds of facilities in just a few years.
One way Amazon hopes to accelerate the expansion is through Orbital, a smaller warehouse system Business Insider previously reported on.
These roughly 100,000-square-foot facilities are expected to process about 75,000 same-day and perishable units a day, according to the documents. Amazon estimated each Orbital facility would require about $48.4 million in capital spending.
Mercury's internal projections show how important SSDs could eventually become. They are projected to account for about 28% of Amazon-fulfilled volume in 2029 and 50% by 2035, according to the documents.
Amazon's vision of same-day delivery doesn't necessarily mean instant delivery. Internal forecasts show roughly 94% of packages moving through its dedicated same-day buildings would fall into a five-hour delivery window by 2029.
Amazon sees billions in potential value
Amazon's finance team has already reviewed Mercury's economics, with Udit Madan, an up-and-coming SVP overseeing worldwide operations, directly involved, according to the documents.
Its three-year operating plan budgets $6.8 billion for US SSD capacity across 2026 and 2027. Separately, an Amazon finance review estimated Mercury could generate $7.1 billion in economic value over 10 years and turn cash-flow positive by 2030. The company also believes some Mercury spending could be offset by avoiding conventional delivery facilities it would otherwise need to build.
The logic behind the expansion is simpler: Amazon believes faster delivery can make customers shop more.
"When we speed up the service, the probability that somebody buys a product from us goes up," Doug Herrington, Amazon's CEO of Worldwide Stores, said on a podcast earlier this year. "And what's even more interesting is that if they buy it, they're going to come back sooner, and they're going to shop more when they do."
Have a tip? Contact this reporter via email at ekim@businessinsider.com or Signal, Telegram, or WhatsApp at 650-942-3061. Use a personal email address, a nonwork WiFi network, and a nonwork device; here's our guide to sharing information securely.
from Business Insider https://ift.tt/D4p3hQ6
via IFTTT
Comments
Post a Comment