Did Amazon over invest in logistics?

As Amazon reported first decline in product sales in its history, many pundits have started to argue that the company overinvested in logistics during the huge investment boom after the start of the pandemic. Amazon truly has invested.

During the last 12 months Amazon has invested a whopping $60 billion in Capital Expenditures.

In Q2/2020 & Q3/2020 Amazon increased it’s Capital Expenditures by 48% and 34% respectively. Majority of that investment have gone into increasing the fulfilment and shipping capacities of the marketplace. In 2020 the square footage of Amazon warehouses jumped by 48% and in 2021 further 30%.

During 2020 & 2021 Amazon nearly doubled its warehouse capacity, which was a whopping 270 million square feet prior to pandemic.

As the product sales and 3rd party sales (marketplace) growth has declined, some have argued that the warehouse capacity investments were too early.

Long term thinking in action

Amazon is famous for its willingness to be misunderstood even for extended periods of time. It is also not as susceptible to stock market fluctuations as many other corporations.

It is rather safe bet to assume that Amazon keeps on growing from this post-pandemic level. Whether the built up warehouse capacity is filled during this year or during the next five years, is somewhat irrelevant in the context of Amazon.

They clearly feel confident that they will eventually need the capacity. The capacity also enables Amazon to keep investing in its customer promise of faster and more reliable deliveries. Something which Amazon has tended to excel over its main rivals.