Staff photo by John Rawlston/Chattanooga Times Free Press Earthmoving machines continue preparing the cite for the Amazon fulfillment center being built at the Enterprise South industrial park near the Volkswagen plant.
Amazon's two Hamilton Place mall-sized distribution centers planned for Southeast Tennessee are part of a broader effort by the world's largest online retailer to get better and faster, analysts say.
"It's very forward thinking," said Mark Brohan, research director for Internet Retailer magazine, about the company's plan to invest heavily in new distribution centers this year.
Brohan said the centers enhance Amazon's already highly rated customer service and give the company "local market power."
"They took a page out of the playbook of chain retailers and got closer to customers," he said.
Work on the pair of 1 million-square-foot fulfillment centers in Chattanooga and Bradley County is moving ahead at a rapid clip.
While it was just a little more than a month ago when Amazon officially announced the projects, more than two dozen earthmovers and other heavy equipment were on each site last week.
At Enterprise South industrial park, workers were making preparations to lay sewer pipe and run electricity connections on the cleared, 80-acre parcel.
About 30 miles away in Bradley County, site work on the Lauderdale Memorial Highway location just off Interstate 75 near Charleston, Tenn., was well under way.
The company is to invest about $139 million in the two centers that Amazon officials aim to get up and running by the busy Christmas season. The company plans to create more than 1,400 full-time jobs and more than 2,000 seasonal slots.
Amazon plans to add six new distribution centers worldwide in 2011, including two in Southeast Tennessee. Below are Amazon's totals after the expansion:
* Centers worldwide: 53, including 22 in the U.S.
* Square feet: 24.5 million
* Increase in space over 2010: 40 percent
* 2011 additions: two in Chattanooga area, one in South Carolina, two in Japan and one in Scotland
Source: Goldman Sachs
Tom Edd Wilson, the Chattanooga Area Chamber of Commerce's chief executive, said Seattle-based Amazon is "a new wave of business" in the United States.
"They've got a different sort of product. Their world moves a lot faster," Wilson said. "They bring a totally different attitude toward development. Speed is of the essence."
Trevor Hamilton, the Chamber's vice president for economic development, said the project appears on schedule. The next step is picking a general contractor to raise the massive structures, he said.
"I've been amazed how quickly site preparation is taking place," Hamilton said, adding he doesn't believe the severe winter weather has slowed down the pace of work.
Goldman Sachs, the Wall Street investment bank, said in a research note last week that Amazon will add more than 7 million square feet of distribution space this year, up 40 percent. The additions will bring Amazon's total to 24.3 million square feet nationally and internationally.
Amazon is adding the two sites in Southeast Tennessee and one in South Carolina along with two in Japan and one in Scotland.
"Larger fulfillment centers for Amazon are more efficient," said Goldman analyst James Mitchell.
Still, spending on distribution and fulfillment has taken a toll on short-term profits, analysts said. Last Thursday, Amazon posted quarterly revenue that fell short of analysts' estimates and it forecast disappointing first-quarter operating margins.
At the same time, net income was $416 million, or 91 cents a share, up from $384 million, or 85 cents a share, a year earlier.
Brohan said Amazon already has the best technology platform in its sector and ranks highly in customer service.
"It has spent billions of dollars building up its infrastructure," he said.
Brohan said the company has a feature called Amazon Prime in which people pay a $79 annual fee and get two-day and standard shipping for free on select items and one-day shipping for $3.99 an item.
"It's popular among frequent buyers," he said. "To sustain customer service like that, you need a lot of local and regional fulfillment."
In bigger cities, Amazon is offering same-day delivery within a certain window of time, Brohan said.
"You can't do that unless you've got boots on the ground ... and regional fulfillment centers," he said.
Hamilton said Amazon's hiring plans haven't changed. Amazon has said it plans job fairs this summer.
"It's still a bit early right now for Amazon to be hiring," Hamilton said.
As the buildings go up, Amazon will become more active in the Chattanooga and Cleveland markets, he said.
"Expect more to follow," the Chamber official said.
Contact staff writer Mike Pare at firstname.lastname@example.org or 423-757-6318.
Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...