Amazon Opting for a New Move : Testing Cheap Warehouses

Amazon Testing Cheap Warehouses DataHawk Blog

According to eMarketer’s Holiday Shopping 2019 report, the shoppers in the US will spend whopping $135 billion online in November and December, which will make up 13.4% of all holiday sales. If the forecast is accurate, the US online holiday sales in 2019 will mark an increase of 12.3% compared to 2018.

It means that Amazon have to increase its capacity to make it provides all its customers with their ordered products on time. And even if Amazon faces this challenge every holiday season, this one may break all the eCommerce records.

Amazon Testing Cheap Warehouses DataHawk Blog

The Historical Success of Black Friday and Cyber Monday

Amazon, just like numerous other retailers, faces a massive challenge during christmas season. This is because sales always soar, calling for more inventory storage.

Black Friday 2019 was a historical success, for Amazon too, breaking the record in online sales by totaling $7.4 billion. This is an increase of 19.6% compared to last year.

Thanksgiving sales totaled $4.2 billion, which is also an increase (14.5%) compared to 2018. However, Cyber Monday is slowly becoming the most important day of the year for shopping, which retailers need to take into consideration.

Cyber Monday totaled $9.4 billion in US online sales this year, climbing 20% and breaking the Cyber Monday eCommerce record.

Retailers need more inventory space during the holiday season to make sure they efficiently and effectively meet the high holiday demand. This is especially important for this holiday season, given that it is shorter than last year, as there are now six fewer days between Thanksgiving and Christmas. 

This is often easier said than done. Not for Amazon, though. Amazon just launched a new service that may help it make the upcoming Christmas season, and the holiday seasons in the coming years, completely chaos-free.


Amazon Testing Cheap Warehouses DataHawk Blog

Amazon Storage and Replenishment Service 

Amazon has pledged to its new next-day shipping policy, but it’s challenging to deliver on its promise during the high-demand holiday shopping season. To achieve all this, Amazon has adjusted its delivery network by piloting the new Amazon Storage and Replenishment service. It is testing the new service in Ontario, California, approximately 20 miles from its nearest delivery units. If all goes according to plan, the Seattle-based company plans to expand this service to other locations across the United States.

This inventory storage service will allow Amazon to provide next-day deliveries and effectively meet the high holiday demand, without either overstocking its warehouses or running out of stock.

Every seller on Amazon will be able to store their products in nearby temporary warehouses, that is, warehouses close to Amazon’s units for deliveries. That way, Amazon will be able to replenish its inventory whenever there’s high demand quickly. Its warehouses will not store a significant number of items that no one will buy, and sellers will not risk losing a lot of money on warehouse fees.

Amazon’s sellers won’t need to worry about running out of stock or their products not selling. They also won’t need to lose sleep over hefty storage fees, as their items will be stored in cheap warehouses. That’s another adjustment to the retailer’s delivery network. Cheap warehouses with lower storage fees will be more cost-effective to all Amazon’s merchants. 

But the new storage system with cheaper warehouses will be beneficial to Amazon as well. One-day delivery isn’t very cost-effective, but cheap storage facilities will help to resolve the cost challenges.

Amazon Testing Cheap Warehouses DataHawk Blog

From Last-Mile to Middle-Mile Delivery

Amazon used to focus only on the last-mile delivery, that is, moving goods from a transportation hub to its customers’ homes. It used the US Postal Service, UPS, and FedEx to deliver all the goods.

However, it has expanded its delivery network by including independent sellers with their drivers who deliver Amazon products with Amazon Flex, an on-demand delivery service for helping independent contractors find drivers to deliver Amazon products using their vehicles.

The Amazon Storage and Replenishment service will help Amazon focus on middle-mile delivery as well, which includes transporting goods from manufacturers and shipping ports to warehouses, stores, and customers’ homes. This is very important for meeting the next-day delivery pledge, which the new service will enable through inventory storage located closer to customers.

The company has recently announced its plan to double holiday hiring to 200,000 temporary workers in the US, which is two times more workers than it hired last year. This will help Amazon with all its next-day deliveries during peak shopping times.

What do you think about the new Amazon inventory storage service? Do you believe that the move toward cheap warehouses is the right one for the retail giant and all the other stakeholders? Do you reckon it can make the Christmas season chaos-free for merchants and shoppers? Let us know :) 

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