In recent years, Amazon's logistics strategy has undergone significant transformation. As market demand fluctuates, the e-commerce giant has gradually slowed the expansion of its air logistics network, reflecting a more cautious approach to future economic conditions.
Research analysis reveals that while Amazon Air's flight operations in the U.S. and Europe remain robust, growth rates have notably decelerated. From March to August 2023, flight growth registered just 3.8%, compared to 14.3% during the previous six-month period.
Concurrently, Amazon has shuttered over 40 U.S. warehouses, postponed construction plans for more than 20 new facilities, and halted several European projects—including distribution centers in Reus, Girona, Vitoria, and Seville. These measures mark a stark contrast to the company's previous aggressive expansion strategy.
Amazon explains that scaling back expansion plans represents necessary business adjustments to better align with evolving customer needs and market dynamics. During the pandemic, rapid logistics network growth helped Amazon outpace competitors amid surging e-commerce demand. However, with global online retail growth slowing, the company must now adapt to shifting consumer spending patterns.
Inflation has driven increased spending on essentials while reducing discretionary purchases. U.S. Commerce Department data shows e-commerce growth slowed to just 6.7% in Q1 2023—the lowest rate since 2009. This trend has directly impacted Amazon's operations, with logistics package growth plummeting from 112% in 2020 to just 13% currently.
Excess warehouse capacity and rising logistics costs have further compelled strategic reassessment. Between 2009 and 2021, Amazon's shipping and fulfillment expenses grew nearly fortyfold, reaching $76.7 billion in 2021. These mounting costs threaten profitability, contributing to Amazon's first quarterly loss ($3.8 billion) since 2015. While Q2 losses narrowed, net sales growth hit a two-decade low.
In response, Amazon has implemented austerity measures—reducing third-party logistics partners while increasing fulfillment fees and surcharges. Though these steps may provide short-term cost control, their long-term profitability impact remains uncertain.
Despite this strategic slowdown, Amazon continues developing key regions—opening select fulfillment centers and planning air hub expansions to enhance capacity. The Cincinnati/Northern Kentucky International Airport hub expansion, for instance, will significantly improve aircraft transfer efficiency. Thus, while expansion decelerates, Amazon maintains positive compound growth, positioning for future opportunities.
Meanwhile, intensifying competition sees traditional carriers like UPS and FedEx strengthening market positions, while Walmart, SHEIN, and JD.com aggressively expand logistics capabilities. Walmart enhances last-mile delivery services, SHEIN leverages its agile logistics for rapid inventory turnover, and JD.com advances global cross-border infrastructure.
Amazon's current cautious approach doesn't necessarily threaten its market leadership. As e-commerce continues evolving, the company's future success will depend on its ability to innovate and rapidly adapt to market changes.
