Amazon To Double Same-Day Delivery Hubs

Amazon is doubling down on the strategy it introduced last year to regionalize its retail distribution network—and run the whole logistics network with AI-driven inventory control—by rapidly expanding its same-day delivery capacity.

The online retail giant is focused on speed—it can assemble and ship customer orders at same-day facilities in as little as 11 minutes—and increasing its share of the growing market for same-day delivery of perishable food and medicine.

In his annual letter to shareholders this month, CEO Andy Jassy said Amazon will double the number of same-day fulfillment centers it has opened—from the current total of 58 to more than 100—and expand its capacity to delivery “everyday essentials,” a market segment that grew 20% in a year-over-year comparison in Q4 2023, Jassy said.

“We continue to improve delivery speeds, breaking multiple company records,” Jassy said, in his letter to shareholders this month. “In 2023, we increased the number of items delivered same day or overnight by nearly 70% year-over-year.” Regarding same-day delivery stations, he said “the experience has been so positive for customers that we’re planning to double the number of these facilities.”

A year ago, Jassy announced a coast-to-coast reorganization of the e-commerce giant’s national fulfillment network into eight interconnected regional hubs. Amazon also deployed AI-driven algorithms to predict what customers in the regional hubs will need and guide inventory placement systems.

Now, with 58 same-day fulfillment centers each stocking 100K SKUs in the largest US metro areas, Amazon views the expansion of same-day delivery as a “core building block” for the company’s retail grocery and pharmacy business, Jassy said.

“We have a very large and growing grocery business in organic grocery with Whole Foods Market, and in non-perishable goods. We’ve been working hard on building a mass, physical store offering Amazon Fresh that offers a great perishable experience,” Jassy said, in his letter to shareholders. “What if we used our same-day facilities to enable customers to easily add milk, eggs, or other perishable items to any Amazon order and get same day delivery? It might change how people think of splitting up their weekly grocery shopping and make perishable shopping as convenient as non-perishable shopping already is.”

Jassy said Amazon’s pilot program for drone delivery of medication, which the company introduced at College Station, TX—it’s called Prime Air—is “making substantial progress” and will expand in the near future.

“Drones will eventually allow us to deliver packages to customers in less than an hour. It won’t start off being available for all sizes of packages and in all locations, but we believe it’ll be pervasive over time,” Jassy told the shareholders. “Think about how the experience of ordering perishable items changes with sub-one-hour delivery.”

Source: GlobeSt