For most people, Christmas is the most wonderful time of the year. For Amazon, it is the busiest, hardest and most full of logistical nightmares. And one that tends to cost them money, because playing catch-up during the holiday season is a very expensive business.
But this year, Amazon swears it is going to be different. This year’s plan is to get far ahead of the crush of orders by building big.
The response is rational considering that Amazon missed quarterly earnings expectations during the holiday quarter, a loss that is largely explicable in terms of delivery costs. Overwhelmed by the large supply of partner merchant goods that needed to be both stored and shipped, Amazon ended up relying on last-minute solutions that were much more expensive.
Once burned, twice shy and now, according to CFO Brian Olsavsky, Amazon is in the process of adding 18 warehouse facilities this quarter in preparation for the holiday crush. That triples up the warehouses slotted for the same quarter last year – when Amazon built only six.
“It’s a combination of what we saw in Q4 of last year and what we’re seeing year to date in unit growth,” he said on the call.
The additional warehousing is just one part of the plan. They have also raised the fees charged to merchants using their logistics networks during the holiday rush, but have lowered fees for the pre-holiday period in an attempt to motivate merchants to get their stock out the door in advance of the holiday rush.
Amazon has also loosened its rules such that merchants can ship goods from their own warehouses and still qualify them for the Amazon Prime program.