Amazon is in the midst of aggressive efforts to expand its business operations across the US. The ecommerce giant has successfully lobbied to gain approval from local authorities as it rolls out its same-day delivery services in a number of US states.
Amazon has already enjoyed record profits as a result of its distribution technology during the Covid-19 pandemic and the brand has become hugely attractive to local and regional authorities who are battling to get their economies back on track. With US job growth being unexpectedly weak, there are hopes that Amazon can continue to create many more employment opportunities across the nation.
Last year saw Amazon creating over 400,000 jobs as well as investing $150 billion across the country, and this figure is expected to rise significantly in the future. 2020 also witnessed the creation of over 100 Amazon distribution centres across the US alongside the $750 million construction of a secondary company headquarters in Virginia.
All of this has been done in a bid to slash delivery times. Amazon’s same-day and next-day delivery products have proven extremely successful, although more needs to be done to penetrate a greater number of markets in the nation. Such projects clearly require significant resources and Amazon’s capital expenditure exceeded $40 billion in 2020.
Balancing the rewards with the risks of spending money in developing and operating new sites is all part of Amazon’s expansion strategy. As such Amazon has been carrying out a series of talks with local officials in all of its focal points to try and leverage tax subsidies that would offset the expansion costs.
The hope is that if Amazon were to launch a new site it would increase the number of warehouse jobs in that area by over 25%. This is coupled with the fact that bringing a brand name like Amazon to a particular locality would bring a certain amount of political prestige.
What’s expected from Amazon’s Q3 earnings?
Amazon’s plans for expansion form an integral part in how investors will be reading the company’s third-quarterly financial report. Currently there is a fair amount of optimism that Amazon will outperform the expected revenues and earnings compared to last year.
This is due to ongoing consumer trends towards ecommerce that have helped Amazon maintain unparalleled rates of growth. As such the plans to hire over 125,000 employees to fill roles in everything from transportation to fulfilment shouldn’t be too surprising. This is coupled with the fact that Amazon is seeking to invest significantly in technology and corporate areas with over 40,000 positions looking to be filled.
Such investment decisions may have a short term impact on revenues, although Amazon’s high performing cloud computing services might help to offset this. Above all, the remainder of 2021 could prove to be pivotal in how Amazon seeks to maintain its position as a giant of ecommerce. But with major investment in distribution, it looks like Amazon is set to dominate how we purchase goods in the US for some time.
