The robots have arrived in force at Amazon.com Inc., foreshadowing another eventful year of the leading e-retailer raising the bar when it comes to delivery of online orders. In May, Amazon CEO Jeff Bezos said Amazon had deployed 1,300 robots in its warehouses, toward a goal of 10,000 by the start of 2015. It turns out Bezos under-promised: Amazon has deployed at least 15,000 robots in 10 U.S. fulfillment centers in California, Florida, New Jersey, Texas and Washington state, according to the retailer’s own figures and a spokeswoman for Amazon, No. 1 in the Internet Retailer Top 500 Guide. (See list below for the locations of those warehouses.)
As noted in the upcoming January issue of Internet Retailer magazine, which will feature a cover story about what experts predict Amazon will do in 2015, the robotic deployment represents the latest fruit from Amazon’s $775 million purchase of robotic logistical provider Kiva Systems Inc. about two years ago. According to a December estimate from Janney Capital Markets, Kiva enables Amazon warehouse workers to pick items two or three times faster than filling orders manually, and the system, when more broadly implemented, could result in the retailer reducing fulfillment costs by $450 million to $900 million in North America.
The increasing use of Kiva technology is just one example of Amazon’s increased investments in fulfillment. The retailer in the third quarter reported that spending on fulfillment increased 30% year over year to $2.64 billion. That’s down from the second and third quarters of 2013—when spending increased 35.5% and 34.4%, respectively—but slightly up from second quarter of 2014, with a 29.3% fulfillment increase. At least some of that has gone to enabling same-day delivery in a growing number of markets.
As of late 2014, Amazon already offered same-day delivery of more than 1 million products to about 17% of the U.S. population and 9% of the Canadian population, according to Internet Retailer estimates. 47% of respondents to an Internet Retailer survey conducted in November and December expect that U.S. figure to hit reach 20% this year, with 25% expecting same-day delivery to reach 50% of the U.S. population by year’s end.
The effect of those deliveries—and the fact that Amazon operates 90 fulfillment centers in the United States, according to a December estimate from ChannelAdvisor Inc. CEO Scot Wingo—will be increasingly felt by e-retailers, even those that are not direct Amazon rivals. “The game has really been upped by Amazon. I think people literally start twitching if they don’t get their packages in two days,” says Jules Pieri, CEO of The Grommet, an online marketplace and business-to-business wholesale operation for artsy and otherwise unique products. That’s one driver behind The Grommet’s effort to build or find better software for tracking shipments in an effort to please suppliers and customers.
Amazon is also boosting its sortation center network, another likely focus for the coming year. Designed to promote even speedier deliveries and to allow Amazon to steer clear of stumbles that might be made by the major carriers, the centers enable Amazon packages to be arranged by ZIP code before heading to nearby post offices for the final delivery leg. This holiday shopping season, Amazon was expected to have 15 U.S. sortation centers in operation, up from eight in 2013.
If sortation proves its mettle during the holidays, Wingo anticipates Amazon adding another “30 to 50” in 2015. That could help Amazon make more Sunday deliveries, too, he says. Amazon already works with the U.S. Postal Service on a grocery delivery test in San Francisco and at least 15 other cities, and in late 2014 the postal service sought permission to expand the test for two more years.
For much more about the fulfillment, grocery and other moves Amazon might make in 2015, and what those moves will mean for the larger e-commerce world, subscribe for free to Internet Retailer magazine now.
Here is a list from Amazon of the warehouses that include the latest technology, including Kiva robots:
• Tracy and Patterson, CA
• Haslet, Coppell and Schertz, Texas
• Robbinsville, NJ
• DuPont and Sumner, WA
• Ruskin and Lakeland, FL
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