By Jeffrey Dastin

(Reuters] – Amazon.com Inc. (NASDAQ) has invested billions of dollars in new warehouses over the past few years. It explained to investors it couldn’t afford to not meet rising consumer demand.

An analyst says that Amazon could have constructed too much too fast.

Amazon, the world’s biggest online retailer reported Thursday $2 billion more in additional costs due to its excess fulfillment and transport capacity. This is a drastic shift from two years ago, when Amazon was forced to reject merchants because there wasn’t enough space for essential supplies.

Brian Olsavsky (chief financial officer) stated that the company has lowered its capital spending plans for 2022. Amazon will invest less in fulfillment projects than it did last year, and its transportation investments will remain flat or slightly lower.

It was only halfway through 2021 that the new reality emerged. Amazon was poised to double its warehouses and delivery networks, which is due to the acceptance of online shopping by customers to prevent COVID-19 infected stores. First time that space wasn’t the main problem for Amazon, it was the labor required to fully staff its facilities. Amazon had 270,000 employees in just six months.

Consumer demand dropped after the Christmas holiday as usual. Amazon’s statistics showed that online sales dropped from one year ago. After the Omicron wave receded, brick-and-mortar shops beckoned customers. Others faced the dilemma of buying goods or filling up their cars with expensive gas. Amazon states that Amazon’s order patterns remain the same.

Olsavsky stated that company appears to have been “overbuilt for the current demand.” Olsavsky later told reporters that Amazon has no regrets and added: “Many build decisions were made 18-24 month ago. So there are limits on what we can adjust in the middle of the year.”

David Glick (ex-Amazon vice president) is the chief technology officer for Flexe. Flexe fulfills on-demand orders and provides extra space.

He stated that Amazon might have been a little ahead of its fulfillment capacity, however they will continue to grow their capacity in the coming year. Amazon’s new Buy with Prime program, which allows them to ship and store goods directly sold by independent merchants, could also be helpful.

These warehouses will be required by Amazon, according to Michael Pachter from Wedbush Securities. Amazon’s information was of little comfort.

They didn’t see it coming when they created all the fulfillment centers. Pachter asked this question, noting Amazon’s rapid growth of its two-decade-old capacity by 24 months. It’s possible to do this in 48 hours.

Operating income decreased 59% to $3.7B in the first quarter. Rivian, Amazon’s electric car maker Rivian shares fell precipitously. This was the company’s first ever net loss since 2015.