Why Amazon's Robot Army Could Save $10 Billion And Change Your Delivery Game

BofA Securities analyst Justin Post maintained a Buy rating on Amazon.Com Inc AMZN on Monday with a price target of $230.

Last week, Amazon announced eight new robots at its Delivering the Future event, including seven for its delivery stations and one for fulfillment centers, Post said.

Robots, including Tipper, ZancaSort, and Agility, can sort packages more efficiently, while Echelon and Vision-Assorted Sort Station can assist with handling.

Also Read: Amazon’s $25 Billion Robotics Push Targets Cost Savings, AI Growth And Temu Competition: Report

In fulfillment centers, Vulcan can pick and stow items from pods using a combination of built-in conveyor belts and suction cups.

Vulcan can “feel” items with force feedback sensors and avoid damaging items. According to Amazon, robots help with about 75% of customer orders, but robot touchpoints per package will likely increase as Amazon introduces more robot types.

The post highlighted Amazon’s close to 1 million logistics and fulfillment employees, which can have 50% annual churn, and robotics can help solve potential long-term staffing bottlenecks.

On Amazon’s first-quarter earnings call, CEO Andy Jassy said robotics will be key to improving its cost structure, fine-tuning the company’s inbound network, and building out same-day delivery sites.

Post also noted that the cost savings enabled by robotics would open more rural areas to same-day delivery.

Robots can drive cost efficiencies by reducing labor costs, employee injury costs, higher utilization of Amazon’s warehouses, and order accuracy. This, in turn, decreases the number of product returns. Per MWPVL, returns can be approximately 20% of total fulfillment and delivery costs, the analyst said.

Amazon indicated that the company “is now ready to implement these innovations at scale,” though some robots will not likely launch until 2027.

Still, Amazon is already experimenting with robotics at its new 12 Generation Fulfillment Center, which opened in late 2024. This facility, located in Shreveport, Louisiana, spans more than 3 million square feet and houses 10 times more robots than previous generations.

According to Jassy, 12 Generation Fulfillment Centers can “reduce fulfillment processing time by up to 25%, increase the number of items we can offer for same-day or next-day delivery, and is expected to drive a 25% improvement in our cost to serve during peak”.

With fulfillment costs at $99 billion in 2024, even a 10% savings could add $10 billion in profits to the bottom line.

Amazon’s robotic efforts thus far have been mainly focused on fulfillment, which, according to Post, represents around 17% of Amazon’s total costs (and 15% of total revenues).

Delivery could be another area of material cost savings, with shipping costs representing another 17% of Amazon’s total costs (and 15% of total revenues).

With Zoox AV capabilities ramping up and more efficient MK30 drones launched late in 2024 (Amazon aims to deliver 500 million packages by drone annually by 2030), Post noted Amazon will also be able to find long-term cost savings in delivery, leveraging the company’s AI technical expertise.

Price Action: AMZN stock is up 7.9% at $208.49 at the last check on Monday.

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Image created using artificial intelligence via Midjourney.