How much will people spend online this holiday season? All of those extended Black Friday and Cyber Monday sales will contribute to a record high for online spending this year.
Amazon has grown to be the go-to source for online retail — which some experts believe to be a major contributing factor in the bankruptcy of brick-and-mortar retail giants such as Toys “R” Us and Sears. Meanwhile, other physical stores, like Walmart and Target, have been busy making game plans to compete with Amazon in order to take a piece of the big spending. To prepare for the holiday rush, Amazon has sophisticated logistical and supply chain strategies in place to help ensure the company meets the needs of every last-minute shopper.
The digital giant already holds a massive share of sales. Of the top 15 leading retail e-commerce companies in the United States, according to Statista, Amazon’s share of retail e-commerce sales outpaces all of them combined. Right now, the company makes up nearly 38% of all online retail spending in the U.S.
From a logistics and supply chain perspective, how does Amazon manage to maintain a satisfying customer experience at such high rates? Put simply, it comes down to two main factors: huge, efficient warehouses and fast, cost-effective shipping.
Huge Warehouses and Efficient Picking
During the holidays, some Amazon warehouses pick, box, and ship more than 1 million items. Humans and robots work together in these warehouses to fulfill the influx of seasonal orders. Orange, 350-pound robots carry around shelving units that human workers stuff with necessary items in order to optimize the picking process and reduce walking distances, ultimately allowing the retail giant to send orders faster.
Reducing walking distance within a warehouse is especially important when facilities are as massive as those of Amazon. Amazon currently has more than 300 fulfillment centers in the U.S., averaging 800,000 square feet of storage space.
Staffing for these fulfillment centers during the holiday rush is planned year-round, but peak season — during which vendors send extra stock so that storage and quality control can commence — begins around late September.
Fast, Free Shipping to Compete
Shipping is a costly endeavor when moving such high quantities of products. In 2022, Amazon spent $83.5 billion on shipping alone — much of that spending happening during the holiday season. So, how does Amazon manage this many shipments during the holidays?
In 2018, about 40% of Amazon’s packages were shipped using USPS, but the company has created its own delivery service that rivals UPS. The company’s same-day delivery services offer Prime members same-day retail and even grocery delivery. In 2022, Amazon kicked off its partnership with Rivian by sending hundreds of electric trucks into a handful of U.S. markets. During the 2022 holiday season, the e-commerce giant used its Rivian EV fleet to make deliveries in more than 100 U.S. cities.
Amazon also created “Amazon Day,” where users are able to choose a specific day for delivery of all orders within a certain timeframe. This aims to cut costs for the company, reduce porch theft, and benefit the environment.
‘Tis the Season for Expedited Shipping
Amazon has been preparing all year for the 2023 holiday season, remaining on the cutting edge of supply chain and logistics processes. Only time will tell what new methods of efficiency this tech and retail giant will come up with next.