Dive Brief:

• Amazon expanded the square footage of its fulfillment and logistics network by 50% in 2020, with "a significant number of [new buildings coming] online in Q4," Chief Financial Officer Brian Olsavsky said on the company's earnings call Tuesday. Olsavsky said in October the company was on track for this amount of expansion.
• Investments in its fulfillment and transportation network have helped one-day shipping return to normal levels in some areas, Olsavsky said. The e-commerce company struggled with shipping speed early in the pandemic, as high volumes overwhelmed its network.
• "Some cities are back probably to one-day levels that they saw — or even better — pre-pandemic," he said. "Other areas that may have other dynamic issues are still working their way out of backlogs and volume issues."

Dive Insight:

The storyline of 2020 for e-commerce was one of high demand overwhelming logistics and fulfillment capacity. Amazon wasn't alone here. UPS executives spoke of a similar struggle in their earnings call this week. An important part of returning to normal fulfillment speeds, Amazon executives said, is capacity expansion.

Capacity also allows Amazon to process a larger percentage of shipments through its internal network. More than half of Amazon's packages are handled via Amazon Logistics, Dave Fildes, director of investor relations at Amazon, said on the call.

"It gives us ... much more certainty on being able to get items from point A to point B," Fildes said, adding that Amazon's third-party delivery providers and the U.S. Postal Service continue to be important partners.

The retailer also expanded its capacity with more workers.

"We welcomed nearly 175,000 new full and part-time employees in Q4 alone," Olsavsky said. "This compares with 50,000 in Q4 of 2019."

Amazon's fulfillment costs grew more than 50% YoY for Q4 and more than 45% YoY for all of 2020, according to the company's financial filings. Worldwide shipping costs also continued to increase for the retailer, growing 67% YoY in Q4.

One analyst asked the Amazon executives when the company's shipping cost could begin to level out. But Fildes didn't provide any guidance on this, simply saying that the company was working to add capacity to get it back to pre-pandemic levels of one-day delivery.

Amazon was not alone in struggling with one-day shipping in 2020. A study by Accenture looked at 116 retailers throughout the year and found none of them managed to deliver in one day during 2020, down from three in 2019.