Comparison of Amazon/Costco Shows Trend of More Efficient Use of Real Estate

Amazon’s revenues have more than doubled in the past four years, from $14 million in 2007 to $34 million in 2010.  Online retailing is clearly making the transition from promising fad, to being a widely accepted way of life.  As an anecdotal measure, I gave Amazon gift cards at Christmas and I’ve spent a not insignificant amount on Kindle books in the past three months.  The ubiquitous nature of Amazon and it’s potential as currency in the way it allowed me to buy gift cards for far away family members, as well as its ability to combine shopping with discovery of goods (like “80% of shoppers who bought this item also bought this other item”) means that its best days are likely ahead of it.

It is somewhat disconcerting then from a real estate standpoint to see how efficient Amazon is with real estate!  Consider that Costco has a combined 84 million square feet if you consider their distribution centers and their warehouse/retail locations.  Amazon has only about 26 million square feet of distribution/warehouse space (it has no retail space to speak of).

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Costco has greater revenue than Amazon for now, but if you look at revenues/sf of space, Amazon comes out way ahead.  I used Costco in this example even though Wal-mart is probably a better comparison with Amazon if you consider diversity of goods offered.  The reason I did this is because Costco is more efficient than Wal-mart on a revenue/sf basis.  So Amazon is significantly more real estate efficient than a competing retailer that is already very real estate efficient for its segment.

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