Amazon had initially planned to open its two newly built Elkhart facilities in 2023, but the year came and went without that happening.
The brand new structures remain idle.
Amazon in 2021 and 2022 spent hundreds of millions of dollars to build a new fulfillment center at County Road 17 and the Toll Road, and a smaller local delivery center on County Road 6 near the airport.
Amazon officials have not replied to our interview requests on this for months now. So we turned to Marc Wulfraat, president of Montreal-based MWPVL International Inc. As part of their retail distribution consulting, the company keeps a close eye on Amazon.
Wulfraat says Elkhart is not alone. The firm is tracking 36 newly built, yet-to-open Amazon facilities in the U.S.
To put it simply, Amazon overbuilt during the pandemic. Eager to capitalize on the surge of demand for e-commerce because everyone was trapped in their homes, Amazon launched a building spree in 2021 and 2022.
From permitting to construction completion, it’s typically a three-year process.
Then the pandemic ended and consumers wanted to get back out into brick and mortar stores. In the first quarter of 2022, Amazon lost $4 billion, it’s first quarterly loss since 2016. They put the brakes on new openings and have shifted their focus to their tech businesses.
Wulfraat says Amazon is doing the right thing to let its retail demand catch up to its capacity.
"It's just a question of how much excess capacity do they have today in the network?" Wulfraat says. "They want to let that fill up, and they'll start flipping on these fulfillment centers. Because you have to think, a fulfillment center is like a cash register for them. Each time they flip one of those on, they've got operating expenses and payroll that can easily be $40, $50, $60, $70 million. So they don't want to add that expense until they need to."
