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: Amazon has spent billions to get within a 1-hour delivery distance of many U.S. customers, but Walmart and Target are still winning that race

0 Inc. has built a network of distribution centers, fulfillment centers, locker hubs, stores and more that bring the e-commerce giant within swift delivery distance to many customers, but Walmart Inc. and Target Corp., with their thousands of brick-and-mortar stores, are still closer, says UBS.

According to the latest Evidence Lab report, Amazon

invested $35 billion in net capital expenditure (capex) in 2020 to build out its infrastructure, much of that spent on fulfillment capabilities.

“This includes investments in growing its fulfillment and logistics network square footage by 50%, its middle mile capabilities (incl. Amazon Air), and its last mile capabilities,” the report said.

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“Assuming ~50% of Amazon’s net capex was dedicated to its North American segment, it would equate to a number that’s larger than Walmart, Target, Home Depot, and Lowe’s combined spend.”

As a result, Amazon delivery stations are now within 60 minutes of 77% of the U.S. population, up from 71% the previous year, UBS said.

But Walmart

stores are within an hour of 99% of the U.S. population. And Target

is an hour from 94% of the U.S. population.

“While Amazon has a head start, traditional retailers are dedicating more of their own capex budgets to digital,” UBS said. “This especially holds true for mass merchants, which offer product mixes that most closely mirror Amazon’s,” UBS said.

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There was a time not too long ago when stores were seen as a liability for traditional retailers that struggled to compete with the convenience of Amazon’s delivery operations.

Now many stores operate as mini-fulfillment centers, not only getting purchases to consumers quickly, but doing so at reduced cost when customers take advantage of store pickup options.

Target has talked up its pickup capabilities for these reasons. Target’s online sales are forecast to reach $18.6 billion in 2021 up from $16.6 billion in 2020, according to an eMarketer forecast published Thursday, which calls the retailer’s e-commerce sales growth “nothing short of extraordinary.”

“The company’s omnichannel services are a key force behind this acceleration, and its same-day services, in particular, have played an integral role,” eMarketer said.

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And Walmart continues to invest in its delivery capabilities, announcing recent stakes in DroneUp, a drone delivery service, and Cruise, an autonomous vehicle company.

Both Walmart and Target are planning to spend billions more, though UBS notes that a sizeable portion of Target’s investment will go toward store remodels and new stores. Walmart will focus half of its $14 billion capex spend on digital and supply chain, UBS says.

Costco Wholesale Corp.

is also making digital investments, including the $1 billion Innovel acquisition.

“Across retail, there’s a race taking place to develop new capabilities and to improve
delivery speed to customers,” UBS said.

“Amazon is leading the charge on this front, but we also note that retailers such as Walmart and Target are finding ways to utilize their existing store footprints to help counter its advantage,” UBS said.

Amazon stock is up 4.5% for the year to date. Walmart has slipped 4.1%, and Target stock has surged 36.5% for 2021 so far.

The benchmark Dow Jones Industrial Average

has gained 12.6% so far this year.

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