Amazon has suspended the construction of its new warehouses in Spain until 2024. The e-commerce giant told its providers and partners that it is going to wait and see as the pandemic-driven online shopping has slowed down.
However, Amazon is adamant that its commitment to Spain remains. It promised to continue on the path to fulfill its promise of having 25,000 permanent employees in the country by 2025. “We will end 2022 with more than 20,000 permanent employees, after creating 2,000 jobs this year,” the company said in a statement.
This year alone, Amazon has opened new logistics stations, Amazon Fresh hubs and a logistics center in the country. In July, the company launched a 130,000 square-meter storage and management facility in Onda, a town in eastern Spain.
Due to the economic uncertainty and continuous rising inflation rates, the company reported its first quarterly loss in seven years this May. The company’s marketplace saw strong growth during the pandemic when brick-and-mortar stores closed and consumer demand increased. However, this has since reversed – and as the demand decreased, so have profits.
Excess capacity, lost productivity and inflation cost the company 5.6 billion euros ($5.51 billion) in the second quarter of this year alone.
The current economic situation in Spain does not seem to bode well for Amazon, as the increasing inflation has put its low-margin model in jeopardy and may force the company to raise its prices to avoid suffering huge losses. The inflation in Spain has already reached around 10.5 percent and e-commerce is slowing down as well.
However, Spanish citizens will still continue to see amazon. The company already has 28 logistics centers in Spain, including its new center in Onda that has over 130,000 square meters of storage and can manage up to four million units of large products.
Spain is not the only country where Amazon has seen halts in new projects. The company has also abandoned other facilities in the United States that are already in the works or in the middle of planning. A separate report said 42 Amazon facilities will no longer be opening.
Delayed openings for other warehouses are also reported as constructions were left unfinished or halted by the company. Hanover and Essex Amazon delivery stations are said to be in the works of shutting down, affecting almost 300 employees.
Marc Wulfraat, founder and president of global supply chain and logistics consulting firm MWPVL International, noted that Amazon still still builds new facilities at an astonishing pace. Amazon currently has over 1,200 small and large logistics facilities operating in the United States. (Related: Amazon walks back plans to build 16 warehouses this year.)
Amazon experienced a massive boom in business in 2020 and 2021, when most of the U.S. relied on the company’s online marketplace and delivery services for their needs.
But now, this surge in demand that accommodated this rapid expansion is slowing down, leaving the company with a massive surplus in space that it needs to get rid of to save on operating costs. It is even looking to sublease at least 10 million square feet of the company’s extra warehouse space.
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