Amazon.com Inc. is taking over the package rooms of some of the country's largest apartment landlords, in a move that could help consolidate its control over how goods make it from the warehouse floor to the front door.
Amazon has signed contracts with apartment owners and managers representing more than 850,000 units across the U.S. to begin installing Amazon locker systems in their buildings, according to the landlords. Amazon has commitments to install the lockers in thousands of properties, many before the peak holiday shopping season, according to a person familiar with the matter.
Several of the nation's largest operators, AvalonBay Communities Inc., Equity Residential, Greystar and Bozzuto Group, have signed up so far, company executives said.
For several years, landlords have struggled with how to manage the growing mountains of packages they receive each day. Staff at larger buildings end up devoting several hours a day sorting mail, while boxes are piled in every spare cranny. Most say it is the single largest problem they face.
Amazon's move, if successful, is likely to shift how the biggest apartment operators deal with packages toward a fully automated system that residents will be able to access 24 hours a day.
The locker program, dubbed Amazon Hub, will accept packages from all carriers and not just for purchases made on Amazon. They will be open only to residents, not the wider community. Residents will receive a notification when they have a package and a code allowing them to open one of the slots.
Apartment owners pay about $10,000 to $20,000 to purchase the lockers initially and don't pay a monthly fee. Most landlords said they don't plan to charge residents but to offer it as an amenity. They could also make back some of that cost in savings on staff labor.
Greystar, the largest apartment manager in the U.S., currently has commitments to install the Hub system in 125 communities over the next several months. Next year it plans to offer the locker system in all buildings that Greystar owns or manages, according to Gardner Rees, senior managing director of Advantage Solutions for Greystar.
Karen Hollinger, vice president of corporate initiatives at AvalonBay, which has an ownership interest in about 80,000 apartments, said the average apartment community in the company's portfolio now receives some 1,000 packages a month, up from 650 a year ago. She said AvalonBay has seen a 30% annual increase in the volume of packages it receives for several years running.
Ms. Hollinger said the company has experimented with using other locker systems, but going forward will only install Amazon systems. AvalonBay started installing the lockers about a month ago. AvalonBay plans to install the lockers in 30 communities this year and at least 70 more in 2018 if that goes well.
Toby Bozzuto, chief executive at Bozzuto Group of Greenbelt, Md., which manages roughly 68,000 apartment units, said staff at one of his apartment complexes spend about three hours sorting packages, which are cluttering up his buildings.
"I think about how much money I spend on my amenity spaces and all of a sudden we were in a situation pre-Amazon hub where we had boxes stacking up," he said. Bozzuto is in the process of installing the lockers in four buildings, including one aimed at residents 55 and over.
Amazon has been searching for ways to make deliveries cheaper. It has recruited a fleet of citizen drivers via its Flex program, which allows people to drop off packages from their cars. It has developed its own air and cargo networks, too.
The most expensive leg of any delivery is the so-called last mile: getting a package to the doorstep. Amazon already has added lockers throughout the U.S., including announcing it is rolling them out at its newly acquired Whole Foods stores.
For Amazon -- or any package carrier -- it is all about density. The more places a driver has to stop and drop of a package, the more expensive the process. It also increases the likelihood of a stolen order if it is dropped off unsupervised.
So dropping off a load of packages in one spot, like a locker or apartment office, is a huge cost saver. And as apartment managers grow increasingly frustrated with more deliveries to take care of, lockers become more attractive.
One issue for landlords has been that it is challenging to update lockers as demand grows and technology changes. Amazon will make lockers that can be placed both indoors and outdoors, making it easier for landlords to add lockers if the volume of packages that residents order exceeds the space they have in their mailrooms. The lockers will also have cellular connectivity so apartment owners don't have to worry about running an Ethernet cable to them outdoors.
One problem Amazon hasn't solved: oversize packages. Ms. Hollinger said Avalon has had to contend with deliveries including furniture to outfit an entire two-bedroom apartment, kayaks and even hub caps. No locker system can reasonably solve that problem.
"The package lockers are quite helpful, but the volume will be hard to sustain in the long term," she said.
Mark-Taylor Companies, one of the largest apartment managers in Arizona with some 15,000 units, was an early adopter of Amazon lockers, which it installed in all of its buildings. The lockers are only used for Amazon packages.
Chris Brozina, an executive vice president, said he was trying to figure out how to solve his growing package problem and approached Amazon because he figured the online shopping giant would want to help make it easier for his residents to shop online. Mr. Brozina said one of his buildings can receive as many as 15,000 packages a year, about half of which are from Amazon.
"We called every Seattle number we could find until we found someone," he said. Amazon's lockers, which he installed two years ago, solved a "monster component" of his package problem, Mr. Brozina said.
Several other startups have sprouted up in recent years that sell or rent locker systems to landlords to help automate their package systems.
Many have faced challenges adapting to the pace of technological change and to the rapidly growing volumes of packages that landlords receive. The costs of installing the systems can also be a turnoff since residents, used to free or cheap delivery, are unlikely to pay for the service, meaning landlords may be sinking significant dollars into it with no direct financial benefit.
Owners said Amazon is offering its lockers at about half the cost it had previously been charging.
Laura Stevens contributed to this article.
Write to Laura Kusisto at email@example.com
(END) Dow Jones Newswires
October 17, 2017 14:11 ET (18:11 GMT)