Amazon.com Inc. (AMZN), the world's largest online retailer, recently announced that it will ramp up its efforts to construct two distribution centers in the Czech Republic.
The first distribution center will be located in Dobroviz, near the Prague airport, and the other near Brno. The company has been facing opposition from local communities in the Czech Republic, leading to building permit delays. Despite these delays, the company expects both the centers to be in full operation before the Christmas shopping season next year.
Amazon said that both the centers will create hundreds of full-time jobs. Amazon is expected to create 2,000 full-time jobs at the Czech sites and about 3,000 seasonal positions during peak shopping periods.
These new facilities will support the continued growth of Amazon within Europe. As part of its European expansion, the company plans to open three more centers in Poland, with two scheduled to be opened in 2014 and the third in 2015.
Fulfillment centers are giant warehouses that help Amazon and other online retailers to store products, ship them and handle returns quickly. These are important for providing the level of customer service that customers have come to expect of the company.
The need for fulfillment center expansion is rising due to the growing demand for online shopping and the ever-increasing needs of Internet users. Prompt and accurate delivery of products is very important for the success of an online retail company.
Also, small retailers find it difficult to provide their customers with relatively cost-efficient same day/next day shipping like Amazon. Hence, they have also been signing up for fulfillment by Amazon, where the company stores their products in its warehouses, ships them and makes those items eligible for Amazon Prime free two-day shipping.
Third parties also use Amazon’s warehouses and shipping services. All these help Amazon to increase the revenue base and drive expansion.
We believe that for Amazon to remain at the top, it is important to maintain its U.S. market share and expand globally. For this, Amazon needs to invest more in fulfillment, and technology and content, especially in international markets, where growth rates are likely to be higher and its own facilities fewer.
Though the increased expenses could hurt the company’s bottom line in the near term, we believe these investments are necessary to maintain its dominance in this highly competitive market.
Other Stocks to Consider
Currently, Amazon retains a Zacks Rank #3 (Hold). Other better-ranked stocks that have been performing well include Autobytel Inc. (ABTL), Geeknet Inc. (GKNT) and Priceline.com Inc. (PCLN). All these stocks sport a Zacks Rank #1 (Strong Buy).