The Profound Impact of Amazon on the Warehousing Industry

Warehouse worker scans the product barcode scannerHave you heard of the Amazon effect? It’s the impact created by the online, e-commerce, and/or digital marketplace on the traditional brick-and-mortar business model. Because so many people can buy so many things on Amazon’s website and have the items shipped to their homes, this changes shopping patterns, customer expectations, and competition in the retail industry.

The Effects on Warehousing

The Amazon effect has transformed the warehousing industry. Consumers used to get most of their retail goods at brick-and-mortar stores. Now, however, they want home delivery and they want it quickly– not months from now, or even weeks… they want their purchased items delivered in a few days or less. Ideally, they’d love to get their purchases within the hour of making the purchasing decision. As you can imagine, warehouses have had to adapt to this kind of need for immediacy. Instead of goods going to stores (from the warehouse), they’re going directly to consumers.

Amazon is huge. Their site represents about 43 cents of each retail dollar spent on online purchases, according to a Business Insider report/analysis by Slice Intelligence. So, Amazon sets the standard for what customers expect when they order something–anything–online. The old 3-5 day shipping offer isn’t good enough anymore. Now consumers expect, want and/or demand “free” 2-day shipping. It wouldn’t be surprising if same day delivery becomes the norm– or even “one hour shipping services!” Competitors are faced with consumers saying to them, “If Amazon can ship me my item within 2 days, why can’t you?”

So, warehouses have had to come up with daily fulfillment strategies to meet consumer demands. They’ve also had to figure out both regional and national supply chain strategies to keep up with the times. All this is happening while warehouses (and companies) have to deal with issues like finding real estate, leasing distribution centers, investing in their racks and material handling equipment and technology, etc.

Are there enough warehouses to meet demand today? Probably not. And it doesn’t help that vacancy rates are near all-time lows. Rents can be too high… New builds can be too expensive. Lease agreements can be messy. And then there’s wage inflation, whereas workers want more money. These market dynamics cause all companies, including those running warehouses, to evaluate what they do, how they do it, and how they can do what they do more efficiently in order to be more profitable.

The Amazon effect is definitely having an impact on the warehousing industry.

That said, if you’re looking for warehousing solutions to meet your company’s every need, learn how Affiliated Warehouse Companies can help.