Amazon’s decision to downsize its sprawling delivery business amid slowing sales growth has abandoned dozens of existing and planned facilities across the U.S., according to a closely watched consulting firm.
MWPVL International Inc., which tracks Amazon’s real estate footprint, estimates the company has closed or canceled plans to open 42 facilities with nearly 25 million square feet of total available space. According to MWPVL, the company has delayed opening another 21 locations totaling nearly 28 million square feet. The e-commerce giant also canceled some European projects, mainly in Spain, the company said.
Just this week, Amazon warned Maryland officials that it plans to close two delivery stations in Hanover and Essex, near Baltimore, next month that employ More than 300 employees. The moves are in stark contrast to previous years, when the world’s largest e-commerce company typically entered the fall in a rush to open new facilities and hire thousands of workers to prepare for the holiday shopping season. Amazon continues to open facilities where more space is needed to meet customer demand.
“There are still some serious cuts to be done in North America and the rest of the world before the end of the year,” said Marc Wulfraat, founder and president of MWPVL. “Having said that, they’ve continued to bring new facilities into use at an astonishing rate this year.”
Amazon spokeswoman Maria Boschetti said the company’s exploration of multiple locations at a time is Very common, and adjusted “to the needs of the entire network”.
“We will weigh a variety of factors when deciding where to develop future websites to best serve our customers,” she said in an emailed statement. “We have dozens of fulfillment centers, sorting centers, and delivery stations under construction and development around the world.”
Amazon says the Maryland shutdown is a move to move jobs to more modern buildings part of the initiative. “We regularly look at how we can improve the experience for our employees, partners, drivers and customers, which includes upgrading our facilities,” Boschetti said. “As part of this effort, we will close our delivery stations in Hannover and Essex and offer all employees the opportunity to move to several different nearby delivery stations.”
Chief Executive Andy Jassy has pledged to unwind as part of a pandemic-era expansion that has left Amazon with excess warehouse space and overemployment. The company typically reduces the number of hourly workers by opening positions, slowing hiring and tightening discipline or productivity standards. But warehouse closures are part of that, and workers are bracing for more. In the second quarter, Amazon’s workforce fell by about 100,000 to 1.52 million, the largest quarter-over-quarter contraction in the company’s history.
The Seattle company has also been seeking to sublease at least 10 million square feet of warehouse space, Bloomberg reported in May.
As stay-at-home shoppers shopped online during the pandemic, Amazon responded by doubling the size of its fulfillment network in two years, an expansion that outpaced the likes of Walmart Competitors and partners, United Parcel Service Inc. and FedEx Corp. For a while, Amazon opened a new warehouse somewhere in the United States about every 24 hours. Jassy told Bloomberg in June that the company had decided to push its forecast of shopper demand to the high end in early 2021, and that the mistake was having too much warehouse space, not too little.
Wulfraat said most of the closures announced this year are delivery stations, with smaller buildings handing over already packaged items to drivers. The canceled facilities include several planned fulfillment centers and giant warehouses containing millions of items. MWPVL estimates that Amazon operates more than 1,200 fulfillment facilities large and small across the United States.
Further tightening of the belt could complicate the already strained relationship between Amazon and organized labor. Earlier this year, a nascent union founded by a fired Amazon worker won a historic victory at a company warehouse in Staten Island, New York. On Thursday, a federal labor official rejected Amazon’s proposal to overturn the result. Last month, workers at an Amazon factory near Albany, New York, filed a petition calling for union elections there.
How much excess capacity Amazon needs to address is hard to gauge, and some analysts believe the extra space will come in handy over the Christmas break.
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