Logistics Give Amazon a Durable Advantage - eMarketer
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Logistics Give Amazon a Durable Advantage

Amazon's fourth-quarter sales were up 22%

February 3, 2017 | Retail & Ecommerce

While competitors struggle to catch up, Amazon has access to cheap capital that lets the company invest heavily in new areas that could build its lead in logistics.

The ecommerce giant has invested billions over the past decade expanding its network of fulfillment centers, now totaling more than 75 in North America, with one in at least 25 US states—giving the retailer easy two-day reach over virtually all of the country.

Primary Reason that US Amazon Buyers Shop via Amazon, Nov 2016 (% of respondents)

On Thursday, Amazon reported that its fourth-quarter sales were up 22%, totaling $43.7 billion. Amazon’s advantages in logistics mean that the ecommerce giant is likely to continue to post strong numbers for the foreseeable future.

Beyond sheer numbers, Amazon has invested heavily in robotics, making its centers extremely efficient. Although Walmart, Target, Best Buy and other retailers have also invested in dedicated ecommerce fulfillment centers, they have far fewer. Generally, shipping from stores is less efficient than from dedicated fulfillment centers.

Amazon’s experiments with drones have generated a lot of press, but more notable is its fleet of 40 Prime Air cargo planes, which give the retailer the ability to move items at will, while also keeping price pressure on UPS and FedEx.

The 2016 holiday season showcased Amazon’s advantages. Data from Slice Intelligence found that Amazon earned a 38% of share of online holiday transactions, and that its share increased as the season went on. Amazon not only had the product selection—the top reason US Amazon buyers in a November 2016 Radial survey shopped with the retailer—it also had the ability to guarantee delivery as quickly as same-day (via its Prime Now service).

Competitors know all of this, and are working with the advantages they have—such as their store footprints, which they can use for click and collect options. However, it’s going to take a while for other retailers to deliver an ecommerce distribution system as efficient as Amazon’s.

Yory Wurmser

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