Warehouse Market in Flux Could Mean Opportunities for Amazon

Simultaneously doubling its warehouse space in the last 18 months and the slowing in economic demand would spell doom for most companies. I don't predict that is the case for Amazon.

First, Amazon is likely about 3 years behind its non-Amazon parcel carrier plans (due to the pandemic) and now with extra capacity they are just better positioned to look to take share in this market.

Ship with Prime is just the start -- that is primarily consumer-focused for those parcels to fill Amazon facilities.

I expect to see several business-focused initiatives where the "Amazon carrier" (first/middle/last-mile) portion is decoupled from the payment and fulfillment (storage + ship from amazon facility).

Witness that Amazon runs a "Ship with Amazon" service in the UK and tested it in California prior to the pandemic before canceling it due to pandemic focus.

I expect that to return.

Yes it is entirely possible that Amazon just concluded there was no reason to run "head to head" in the US market, I highly doubt that will be their conclusion for a few reasons:

- First, utilization is king. if the trucks are on the road and the facilities need to be filled, the company is not going to throw money away.

- Second, USPS will keep losing share. Their network is not materially improving, despite the new services they are offering. It's the middle mile where Amazon is going to win against USPS over and over.

- Third, Because they have the most vehicles on the road now and the largest number of facilities, they have pricing power due to their excess capacity that SMBs would be willing to soak up.

- Fourth, there is still a warehouse shortage in the US as vacancies are only at 3.5% nationwide (Prologis recent earnings call). That combined with historically high construction and land costs means Amazon already has all this cost built up. Now it just needs to deploy growth channels to activate these assets.

Despite the unexpected drop in revenue at Amazon, SMB eCommerce is still growing like a weed and - as they say - that margin is Amazon's opportunity.