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Why Amazon Is Launching 1,000 Warehouses in Suburbia

By Rhian Hunt – Sep 16, 2020 at 1:09PM

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The giant retailer plans to increase this to 1,500 over time.

Online retail titan Amazon (AMZN 0.03%) is muscling farther into the real-world delivery space with a scheme to dot the America's suburbs with 1,000 small warehouses, Bloomberg reports this morning. The company is placing these miniature fulfillment centers anywhere possible, using its own delivery vans to bypass other carriers such as the USPS, United Parcel Service, or FedEx, in many cases.

Sources close to the matter told Bloomberg the multi-channel retailer wants lightning-fast delivery throughout the United States. With the coronavirus pandemic still ongoing and e-commerce more popular than ever, the possibility of extremely quick delivery from a local distribution center could potentially win over customers who would prefer not to make a trip to the store.

An Amazon truck with a white cab and a Prime logo on its side, under a sunny sky.

Image source: Amazon.

The plan possibly casts a fresh light on Amazon's interest in acquiring real estate from bankrupt brick-and-mortar retailer J.C. Penney back in mid-May. The feelers Amazon extended might well have been related to its current push to increase the "granularity" and reach of its distribution network, according to Forbes.

Amazon is clearly becoming its own distribution and delivery service. Marc Wulfraat, president of logistics firm MWPVL International, told Bloomberg "Amazon has built its own UPS." Wulfraat also said the e-commerce giant will be delivering two-thirds of its own packages sometime in late 2020, with the amount soaring to 85% soon thereafter.

Amazon is currently in something of a retail and delivery arms race with Walmart's (WMT -0.16%) Walmart+ service and aerial drone delivery, and Amazon apparently does not intend to stop at 1,000 small distribution centers. Sources told Bloomberg the first 1,000 will be the springboard to bringing the total to 1,500 in the near future.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and FedEx and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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