Amazon shift from CapEx to OpEx

Challenge:

Amazon, a global e-commerce company, needed to expand its operations to keep up with growing demand. Purchasing warehouses, office spaces, and equipment outright would have required significant capital, potentially limiting the ability to adjust to changing market conditions or expand quickly.

Solution:

To address this, Amazon relied heavily on leasing rather than owning its infrastructure. By 2019, the company leased approximately 154 million square feet of warehouse space, compared to just 4 million square feet it owned. This approach provided the company with the ability to expand its distribution network as needed.

During the rapid growth of online shopping, particularly during the COVID-19 pandemic, Amazon used leased spaces to quickly add capacity. When demand stabilised, it adjusted by subletting excess space, showing how leasing provided the flexibility to manage resources effectively.

Outcomes:

• The ability to scale operations to meet demand, especially during peak periods.
• Reduced upfront costs, enabling funds to be allocated to other areas such as technology and operations.
• The flexibility to adjust warehouse space in response to changing needs.

Key Insight:

Leasing infrastructure can provide businesses with the ability to adapt to growth and market changes without the long-term commitment of ownership. For Amazon, this approach supported its operations while maintaining the capacity to adjust as needed.