Amazon.com Inc. said the number of items sold for independent merchants that use its logistics service more than doubled to 2 billion last year, evidence the online retailer’s stepped-up investments in warehouses are paying off with expansion into new areas such as fashion and household goods.
The world’s biggest e-commerce company has differentiated itself by offering fast, free delivery of items from its vast network of shipping hubs where inventory is stored close to customers. Its logistics service, Fulfillment by Amazon, lets merchants send goods to Amazon warehouses and pay a fee for packing and shipping online orders to customers.
The number of merchants using the service increased 70 percent in 2016, Amazon said Wednesday in a written statement. Getting access to Amazon Prime members, the company’s most loyal shoppers, who pay $99 a year for free delivery as well as video and music streaming, is a big reason vendors want to store and sell their goods using Amazon’s website and facilities.
The growth shows that the combination of abundant inventory with quick delivery that Amazon used to win market share in books and electronics is working in new categories such as clothing and kitchen items, said John Blackledge, an analyst at Cowen & Co.
“The infrastructure they’ve built and keep adding to is a big advantage over other companies,” Blackledge said. “No one else can do what they are doing, offer so much and get it to you so quickly.”
Amazon CEO Jeff Bezos, in a letter to shareholders, highlighted Fulfillment by Amazon as a key growth driver that propelled his Seattle-based company in 2015 to more than $100 billion in sales for the first time. Amazon is projected to report that revenue increased 28 percent, to $137 billion, in 2016, according to analysts’ estimates compiled by Bloomberg.
In addition to new categories, Amazon is increasing its growth rate by expanding overseas. Outside of the U.S., sales volume through Fulfillment by Amazon increased more than 80 percent last year.
Amazon added a logistics service in Europe that lets merchants send goods to one Amazon hub and the company distributes the items to warehouses close to customers in the U.K., Germany, France, Spain, Italy, Poland and the Czech Republic.
The rapid growth has a big price tag. Warehouse capacity issues and the cost of new facilities helped increase Amazon’s spending on order fulfillment 34 percent in the third quarter, causing it to miss analysts’ profit projections.
Fast growth prompted the company to accelerate its warehouse building spree last year, with more than 15 fulfillment centers opening in California, Texas, Illinois, Kansas, New Jersey, Georgia and Florida that will collectively employ more than 12,000 workers.
Indiana is a huge part of Amazon's fulfillment network. The company has several major distribution centers in the state that employ more than 9,000 workers, including centers in Plainfield, Whitestown and Indianapolis.