), the world's largest online retailer has announced that it will
build a fulfillment center in Robbinsville, New Jersey. The
online giant will invest more than $200 million for the
Amazon said that the 1 million-square-foot center will create
hundreds of full-time jobs and more than $22 million in tax
revenue for the township. The center is expected to open in early
2014. The company plans to accelerate its investments and build
one more project in NJ, for which the time has not yet been
At the facility, Amazon employees will pick, pack and ship
smaller items, such as books and DVDs to customers. Amazon said
that on an average, the company pays 30% more than traditional
retail jobs, including health care and other full-time
Fulfillment centers are giant warehouses that help Amazon and
other online retailers to store products, ship them and handle
returns quickly. These are important for providing the level of
customer service that Amazon customers have come to expect of the
Over the past few years, Amazon has been spending heavily to
set up new fulfillment centers all around the country. A
Bloomberg report states that Amazon spent $5.3 billion in capital
expenditure in the past five years, of which $2.3 billion or 43%
was spent in the last 12 months.
To further automate its order-fulfillment process, Amazon
agreed to buy warehouse-robot maker Kiva Systems Inc. last year
for $775 million, the company's biggest acquisition since its
purchase of shoe retailer Zappos.com in 2009.
The need for fulfillment center expansion is rising due to the
growing demand for online shopping and the ever-increasing needs
of Internet users. Prompt and accurate delivery of products is
very important for the success of an online retail company.
Also, small retailers find it difficult to provide their
customers with relatively cost-efficient same day/next day
shipping like Amazon. Hence, they have also been signing up for
fulfillment by Amazon, where the company stores their products in
its warehouses, ships them and makes those items eligible for
Amazon Prime free two-day shipping.
Third parties also use Amazon's warehouses and shipping
services. All these are helping Amazon to increase its revenue
base and drive expansion.
We believe that for Amazon to remain at the top, it is
important to maintain its U.S. market share and expand globally.
For this Amazon needs to invest more in both fulfillment and
technology and content, especially in international markets,
where growth rates are likely to be higher and its own facilities
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.
Amazon is one of the leading players in the extremely
fast-growing retail ecommerce market and its strength lies in its
huge scale of offerings, its broad reach and platform approach.
In the third quarter, Amazon's revenue of $13.81 billion and
fulfillment expenses were up, both on a sequential as well as
At the moment, however, most of Amazon's competition (whether
direct or indirect) continues to come from
Currently Amazon retains a Zacks Rank #3 (Hold).
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