An article published by the Wall Street Journal last week has re-ignited the speculation that Amazon is looking to launch a delivery service that would compete directly with the big integrators. Under the name "Shipping with Amazon", the new service will pick up shipments from different companies and deliver them to consumers.
Following the report shares of shipping giants FedEx and UPS slid. By contrast, Amazon only accounts for 3% of FedEx's annual revenue. Amazon has just a tiny fraction of that sort of infrastructure. It has expanded its network of warehouses and fulfillment centers to locate merchandise closer to customers.
If the new shipping service is a success, however, it's not a great stretch to imagine that Amazon might decide to take on the next stage of transportation, and go all the way to door-to-door delivery. Amazon founder and CEO Jeff Bezos has expressed repeatedly his desire for fast, efficient package delivery as an integral part of successful online retail sales, which led to the company's now-famous experiments with home delivery drones beginning in 2015.
Amazon last week launched Prime Now, a two-hour delivery service for its Whole Foods Markets. The WSJ reports that "FedEx has roughly 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 operating facilities globally to handle about 12 million shipments a day".
"In certain situations, an Amazon.com or some very large e-tailer, they can unquestionably do local deliveries, choose to do so, and I think in the cases of some of them, they use various local delivery options today", Smith said. However, Money also notes that with $178 billion in sales and $3 billion in profit past year, along with cash reserves estimated to be more than $20 billion in cash, Amazon is uniquely placed to launch its own air and land P&D service should Bezos give the marching orders. Amazon thinks that they will be able to provide a cheaper alternative for business customers with a more desirable pricing structure, but details have yet to emerge.
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Amazon was a hot topic during FedEx's quarterly earnings call in December.
The Amazon move also comes at a time when FedEx Express, the domestic and global air express business, is gearing up to spend more than $1.5 billion to modernize and expand hubs in Memphis and Indianapolis. However, they often fail to come close to meeting the time frames that you see with orders fulfilled through Amazon itself, she told the E-Commerce Times.
And once again, experts are pouring cold water on the concept of Amazon creating a national logistics network that can take sizeable volume away from the major carriers and the U.S. Postal Service.
David Jones is a freelance writer based in Essex County, New Jersey.