), the world's largest online retailer, announced that it will
build a fulfillment center in Kent, WA. This will be the
company's fourth fulfillment center in the state and join the
ones already operational in Sumner and Bellevue and the DuPont
facility, which is on the verge of completion.
According to Amazon, the one million-square-foot center will
create hundreds of full-time jobs in the town.
At the facility, Amazon employees will pick, pack and ship
smaller items, such as books electronics and consumer goods to
customers. Amazon stated that, on an average, it pays 30% more
than traditional retail jobs, in addition to health care and
other full-time benefits.
Fulfillment centers are giant warehouses that help online
retailers to store and ship products and handle returns quickly.
These are important for providing the level of customer service
that customers have come to expect of Amazon.
Over the past few years, Amazon has invested heavily to set up
fulfillment centers across the country to reduce shipping costs
and speed up delivery to its customers. To further automate its
order fulfillment, Amazon agreed to buy warehouse-robot maker
Kiva Systems Inc. in 2012 for $775 million. This was the
company's biggest acquisition since the buyout of shoe retailer
Zappos.com in 2009.
The growing demand for online shopping and the ever-increasing
needs of Internet users has made it imperative to expand
fulfillment centers. Prompt and accurate delivery of products is
very important for the success of online retail companies.
Small retailers that are unable to provide relatively
cost-efficient shipping are also been signing up for Amazon's
fulfillment services. These services include storage in Amazon's
warehouses and same/next day shipping. These items are also
eligible for Amazon Prime free two-day shipping.
Third parties also use Amazon's warehouses and shipping
services. All these help the onlinne retailer to increase revenue
base and drive expansion.
In our view, Amazon must maintain its U.S. market share while
expanding globally to retain its leadership. For this, Amazon
needs to invest more in fulfillment as well as technology and
content, especially in international markets, where growth rates
are likely to be higher and its own facilities fewer.
Though the increased expenses could hurt the company's bottom
line in the near term, we believe these investments are necessary
to maintain its dominance in this highly competitive market.
At the moment, however, most of Amazon's competition (whether
direct or indirect) continues to come from
Currently, Amazon has a Zacks Rank #4 (Sell). Another stock
that has been performing well and is worth considering include
Harman International Industries
), carrying a Zacks Rank #1 (Strong Buy).
AMAZON.COM INC (AMZN): Free Stock Analysis
EBAY INC (EBAY): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
HARMAN INTL IND (HAR): Free Stock Analysis
To read this article on Zacks.com click here.