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May 04, 2012

Amazon Announces two, count them two, California Fulfillment Centers!

Yesterday, May 3rd, 2012, Amazon announced (via developers USAA Real Estate and Hillwood/Clarion that they are building two 1.1m sq-ft facilities in California.  In this post we give some thoughts on what this means for California, the rest of the World, and the future of Amazon!

Before we start, I'd be remiss in not saying Happy Star Wars day to everyone! Ok, now back to our regularly scheduled blogging.

What does this mean for California?

One center is near San Francisco and the other is near Los Angeles.  What it means for those cities is going to be faster service.  For example, since Amazon built out their SC facilities, here in NC, we are about 50% of the time now getting 2-day prime packages the next day.  We think it's only a matter of time before Prime goes 1-day (maybe regionally) and I wouldn't be surprised to see Amazon also looking at same-day in the San Francisco metro followed by Los Angeles.  Amazon has started making tax deals with states, clearly believing the tradeoff is worth it to get their FCs closer to the customers.

What does this mean for Amazon and "The WORLD?!?"

This brings to 15 the number of FCs that Amazon has announced that will be opening by Holiday 2012.  Amazon started 2012 with:

  • 32 FCs in the US (23m sq-ft)
  • 29 non-domestically (15m sq-ft) 
  • For a global total of a mindblowing 61 FCs
  • Representing 38m sq-ft of capacity

In the Q1 call, they mentioned an intention to build 13 more in 2012 - a 21% increase.  These two new California facilities bring the count up to 15 and that does not include the rumored (but not confirmed) India and Australia facilities, or a 25% increase in capacity (28% if you count India/Australia) announced.

Based on our proprietary tracker, we believe these 15 facilities represent 13m sq-ft which actually increases the footprint 34% - the facilities are getting bigger essentially.

This table details the 15 facilities announced thus far:

.

  Count Announced Capacity (sq-ft) Opening Country State City Details  

.

  1 2/14/2011 1,000,000 Q412 USA Delaware Middletown Classic Drive near Levels Road, Middletown, Delaware - second in state, $90m price  

.

  2 10/25/2011 TBD   Japan   Tosu, Saga “Amazon Tosu Fulfillment Center”  

.

  3 10/26/2011 450,000 Q412 UK   Hertfordshire Boundary Way, Hemel Hempsted, Hertfordshire, United Kingdom, HP2 7GE, 1000 jobs  

.

  4 12/13/2011 1,100,000 Q312 Germany   Pforzheim Buchbusch industrial area, Pforzheim, Germany  

.

  5 12/19/2011 1,100,000 Q312 Germany   Koblenz A 61 industrial park next to the Koblenz motorway, Koblenz, Germany  

.

  6 12/22/2011 1,000,000 Q312 USA Virginia Dinwiddie Dinwiddie Commerce Park at Interstate 85, Dinwiddie County, Virginia - $135m, 1350 jobs  

.

  7 12/22/2011 1,000,000 Q312 USA Virginia Meadowville Meadowville Technology Park, Chesterfield County, Virginia  

.

  8 12/22/2011 1,000,000 Q312 USA Tennessee Lebanon Near Interstate 840 between Central Pike and Stewarts Ferry Pike.  

.

  9 12/22/2011 1,000,000 Q312 USA Tennessee Murfreesboro B. Jackson Parkway and Manchester Pike, Murfreesboro, Tennessee  

.

  10 1/17/2012 538,000 TBD China   Nanning Beibu Gulf Technopark, Nanning, Guangxi, China  

.

  11 1/23/2012 1,000,000   USA South Carolina Spartanburg John Dodd Road near I-26, Spartanburg, South Carolina  

.

  12 3/14/2012 1,000,000   Japan   Tajimi, Gifu Tajimi City, Gifu Prefecture  

.

  13 3/27/2012 1,000,000 Q312 USA Indiana Jeffersonville Will employ 1050, fifth in the state, $150m price tag -- River Ridge Commerce Center  

.

  14 5/3/2012 1,000,000 Q213 USA California Patterson Near SFO, Built by USAA Real Estate  

.

  15 5/3/2012 950,000 Q312 USA California San Bernadino Near LAX, Built by Hillwood and Clarion  

.

  16       India Mumbai   Rumored, from job postings only at this point  

.

  17       Australia     Rumored  

 











If the HTML table above doesn't format well for you, you can expand the following image 

Amazon_fc_tracker_may_2012


You can see that 9 of the 15 facilities are in the US and 6 are non-domestic.

What does this mean for the future?

At the current pace, Amazon is growing their FC count 25% annually and their footprint 30%.  If they keep on this pace:

  • They will have > 150 FCs by 2016
  • They will have > 200 FCs by 2018
  • They will have > 300 FCs by 2020
  • As they get in the 2015-2020 period they would have to build on the order of 30/40/50 FCs a year.

If you think about a company with 200 or 300 FCs..... the capabilities and assets Amazon have at their disposal would be simply amazing.  With half of those FCs in the US, they could easily do same day in the top 10 metros and next day in the continental US.  The FBA network built on top of this would be extremely powerful.   At this level, you could look at the last mile and effectively compete with Fedex/UPS/DHL and have a better global offering.   While Wall St. worries about the costs, Amazon is soldiering forward creating a bigger and bigger lead against all of their competitors.

 

Where do we go from here?  

Australia and India are out there in rumors, but stay tuned as we'll be tracking this closely here at Amazon Strategies.

 

SeekingAlpha Disclosure - I am long Amazon and Google. eBay is an investor in ChannelAdvisor where I am CEO.

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