Amazon Expands Logistics Network to Compete with Walmart, Shein, and Temu

Amazon is significantly ramping up its logistics expansion efforts to better compete against rivals like Walmart, Shein, and Temu. The company is focusing on acquiring industrial property and restructuring its distribution network to enhance package delivery speed and reduce shipping costs, the Wall Street Journal reports.

Amazon has leased, purchased, or announced plans for over 16 million square feet of new warehouse space in the U.S. this year alone. This expansion adds to Amazon’s existing footprint of approximately 413 million square feet of industrial real estate across North America. This substantial increase in warehousing capacity is a strategic move to improve its logistics operations.

Amazon reported strong earnings in the first quarter of 2024 despite reports of dire living conditions for some of its warehouse workers.

A new approach to shipping

To further improve its delivery services, Amazon overhauled its domestic shipping network, shifting from a highly centralized system to a decentralized one comprising nine regions designed to operate independently. This change aims to place goods closer to consumers, enabling faster delivery times and lower costs. In the fourth quarter of 2023, Amazon reported a more than 65% increase in orders delivered on the same day or the next day in the U.S. compared to the previous year.

To support this new decentralized approach, Amazon requires itself and third-party merchants on its platform to hold inventory across multiple locations rather than in a few centralized places. The company has been opening inbound receiving centers, which are large warehouses spanning from 600,000 to over 1 million square feet, to store goods across the country. Additionally, Amazon has been leasing smaller warehouses in rural areas to serve as delivery stations, minimizing final-mile transportation costs.

This expansion and restructuring effort is partly in response to Walmart’s ability to use any of its 4,600 U.S. stores to fulfill online orders. Walmart claims to have stores within 10 miles of 90% of American consumers, giving it a logistical advantage. To compete, Amazon is investing heavily in its own logistics infrastructure to ensure it can offer equally fast and reliable delivery services.

Amazon’s logistics expansion is also driven by competitive pressure from discount retailers Shein and Temu, which have gained popularity among U.S. shoppers due to their low prices on apparel, home goods, and other products (although the two companies were mocked on a recent Saturday Night Live). However, these competitors often have longer shipping times, sometimes extending beyond a week. By improving its logistics capabilities, Amazon aims to maintain its edge in fast and efficient package delivery, reinforcing its position as a leader in the e-commerce market.

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