The company initially invested in building more fulfillment networks at the high end of a very volatile demand outlook, which contributed to $6 billion in additional costs in the first quarter. However, a slowdown in consumer spending due to recession fears and a reopening of physical retail has left Amazon with excess warehouse capacity.
“For the consumer business, as I said earlier, we currently have some excess capacity in the network that we need to grow into,” said Amazon Chief Financial Officer Brian Olsavsky. “So, we’ve brought down our build expectations. Note again that many of the build decisions were made 18 to 24 months ago, so there are limitations on what we can adjust midyear.”
Many warehouse development plans are either being canceled or put on hold in California, Florida, Louisiana, Tennessee, and Texas. Several of these facilities were initially expected to be open by the second half of 2022 but will now be delayed by at least another year. The decision is part of the company’s effort to avoid additional labor expenses resulting from overstaffing — an issue that made up nearly one-third of costs for Amazon in the first quarter.
“It is common for developments of this size to have situations that impact their timeline along the way,” the Quad Cities Chamber said about Amazon’s decision to delay the planned opening of its warehouse in Davenport, Iowa. “It’s our understanding that Amazon is experiencing supply chain issues, just like many of our local employers are experiencing. We’re pleased that Amazon is committed to opening the facility, even if the project is delayed due to unforeseen circumstances.”
