Amazon massively reduced investment into its international logistics operations last year as the world’s largest e-commerce company cut costs amid warehouse overcapacity and a slowdown in its retail sales.

In 2022, Amazon pledged to invest just $1.53bn into logistics, distribution and transportation activities outside the US, about 80% lower than the more than $7.5bn announced in both of the two previous years, according to fDi Markets, a greenfield investment monitor. This was the lowest level for a decade (since 2013 when the figure was $765m) and led Amazon to be dethroned as the world’s leading non-oil logistics investor. 

Unlike Amazon, several other leading investors expanded their global capital expenditure plans in 2022, including German logistics group Deutsche Post (+19% to $3.16bn). Danish shipping company AP Moller–Maersk also pledged its highest ever amount ($2.82bn) to logistics foreign direct investment (FDI) projects, fDi Markets figures show. Last year, Amazon also accounted for just 2.2% of the global total logistics FDI, down from almost 13% in 2021.

Arhi Kivilahti, a retail analyst at Ada Insights, tells fDi that Amazon’s international business was “supposed to be the growth channel” for the company, but has lagged behind its North American business.

“It will be interesting to see how long Amazon is willing to pour money into unprofitable international ventures,” he adds, noting the failure of Amazon’s marketplace in China and the challenges the company has faced in India.

The decline in Amazon’s foreign logistics investments comes after a massive expansion in its network to serve increased demand for online shopping during the pandemic. In the two years up to the end of 2021, Amazon added more than 255 million square feet of space to its global warehouse network, according to company figures collected from Ada Insights. 

“We took a fulfilment centre footprint that we’ve built over 25 years and doubled it in just a couple of years,” said Andy Jassy, the CEO of Amazon, in an earnings call with analysts on February 2 2023, about one year after he took over from the company’s founder Jeff Bezos. 

Mr Jassy said that “the number-one priority” for Amazon is to reduce the cost to serve their operations network, adding that “there’s a lot to figure out” in how to make the company’s network more efficient and productive.

In the first quarter of 2022, Amazon reported additional costs of $2bn due to overcapacity in its fulfilment and transportation network. Figures from MWPVL International, a consultancy, estimate that Amazon is currently using less than two-thirds of its total global warehousing capacity. That is significantly down from the 85% utilisation the company had in 2019.

Aside from logistics, Amazon has announced other cutbacks including a decision to lay off 18,000 workers in January 2023 and its decision to pause construction on its second US headquarters in Arlington, Virginia.