Building Ahead of Demand

On today’s show we are talking about getting ahead of demand. We have seen many businesses anticipate continuing growth and no changes to market conditions.

It happens in virtually every Industry. Even the most analytical companies in the world can get it wrong.

We saw several retail giants experience adverse conditions in the past quarter. Walmart, Target and Amazon were the most visible of these announcements.

Amazon surprised Wall Street with its first quarterly loss since 2015. That happens when expenses exceed revenues. So how did Amazon get it wrong? Did they hire too many people? Did they make too many financial commitments?

The company has been expanding quickly making investments in expanding their fleet of aircraft with their growing captive airline called Prime Air. They have been growing their network of distribution warehouses and fulfilment centres all over the world. Some of these facilities are company owned, but in fact many are leased from developers who built these giant buildings to Amazon specifications.

It seems that Amazon’s construction of fulfillment warehouses has gotten ahead of current demand.

Amazon spooked investors last month after reporting slowing growth and a weak profit outlook that it attributed to overbuilding during the pandemic when homebound shoppers stormed online. At the end of 2021, Amazon leased 370 million square feet of industrial space in its home market, twice as much as it had two years earlier.

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Host: Victor Menasce

email: podcast@victorjm.com