Amazon is spending to grow its shipping business and is not content with just delivering products purchased on its own site. Now, the company is moving goods to external customers in its latest move to compete directly with FedEx and UPS.
“They want to be a new kind of U.S. postal service where anything can get anywhere, but also quickly,” said e-commerce consultant Chris McCabe, who was a seller performance researcher at Amazon from 2006 to 2012.
Amazon stated in its first quarter earnings report that capital expenditures increased a whopping 80% over the previous year, which helped it increase the capacity of its internal logistics network by 50% year-on-year. According to SJ Consulting Group, Amazon now ships 72% of its own packages, up from 46.6% in 2019.
In 2014, Amazon began building its global transportation network from scratch. Seven years and 10 billion shipments later, Amazon already has 400,000 drivers worldwide, 40,000 semi-trucks, 30,000 vans and a fleet of more than 70 aircraft. Perhaps the largest investment to date is the new $ 1.5 billion Amazon Air hub that opened in Kentucky in August.
For external merchants, Amazon already offers a wide variety of shipping services. In the UK, Amazon has a “logistics as a service” program – a business model that DePaul University researchers predict Amazon will launch in the U.S. in the next 18 months, while Morgan Stanley predicted it could happen this year . According to an investigation, Amazon has already begun quietly transporting goods on its planes for U.S. postal service, though analysts say it will not attempt to replicate the wide range of services offered by FedEx and UPS.
“It won’t be just this blanket carrier that will deliver the package you want to any address,” said Dan Romanoff, who researches Amazon for Morningstar. “Amazon is kind of picking cherries from their routes. They want to run and sort out the package sizes they want to deliver.”
Amazon’s algorithms also allow sellers to take advantage of LTL truck space (less than cargo) at reduced prices, while allowing Amazon to make money with the space that would be lost. Amazon salesman Keith Gregory began using the program, called Amazon Freight. Gregory’s vitamin and supplement company, Highland Laboratories, is headquartered in a city of 3,500 people in Oregon and has annual sales of about $ 4 million on Amazon. Gregory says Amazon charges up to $ 1,700 less than FedEx or UPS Freight for some of its routes from Oregon to Southern California.
“For us in a rural community, the fact that someone is willing to take care of us and is willing to accommodate pick-up times and not just say, ‘Okay, we’ll be there every day at 3:30,'” he said. it’s also very attractive. So not only the fare, but the fact that they’re also willing to use their vast fleet of vehicles to help us with our logistics as well, which UPS and FedEx don’t cooperate on. ” said Gregory.
Amazon also offers its Fulfilled By Amazon or FBA services, for orders not placed on Amazon.com, which explains why some orders from eBay, Walmart and others arrive at your door with the packaging of Amazon.
“There were times in our company’s existence when Amazon actually shipped 100% of our orders to all channels,” said Amazon seller Bernie Thompson, who uses what Amazon calls compliance. Multichannel for many of the consumer electronics products sold by your company, Pluggable Technologies.
“If you’re going to buy a pluggable product on eBay today, it’s actually going to come from an Amazon store, and very often it’s going to be delivered by an Amazon delivery service,” Thompson said.
Former Amazon product security manager Rachel Greer said the current expansion of shipping reminds us other times that Amazon has used immense resources and data to disrupt an industry, such as with Prime Video and Amazon Web Services.
“I was part of the process to make sure FBA marketers complied more than a decade ago. And they were saying to me, ‘Well, we have overcapacity. Let’s use it, ”Greer said.“ And then when AWS started, we had overcapacity. Let’s use it. Of course, if Amazon develops a platform, it works well, and of course, if it has excessive capacity, they will try to sell it to someone. “
Watch the video for more information from Amazon executives and online marketers about how third-party shipping is the company’s next big deal.