Amazon understands that the more aspects of your business you control, the better, and it's getting closer to becoming less dependent on shipping carriers. Two reports out this week provide a fascinating look at what the retail giant is doing to build out its own logistics infrastructure and how it could impact the USPS, UPS, DHL, and FedEx.
Mark Solomon writes in DC VELOCITY
, "Amazon.com Inc. has begun the process of assembling a high-level executive team to lead the company's push to develop its own transportation network, according to a person familiar with its strategy and planned execution."
These are no wishy-washy plans - Amazon's objective is to "guarantee delivery within a 90-minute to two-hour window," and do "whatever it takes" to serve every community in the US.
It would seem FedEx's business is already being impacted. And while the thinking is that Amazon plans to continue using its rival, "UPS may be reluctant to continue handling large volumes, given that the two may soon be going head to head."
Solomon explains in great detail the reasons why Amazon is looking to logistics. Meanwhile Wall Street analyst Colin Sebastian of RW Baird wrote in a report out on Monday:
"Just as Amazon leverages infrastructure behind the core retail business to grow AWS and Marketplace, there is evidence the company may extend its increasingly complex and technology-centric logistics and delivery platform as a third-party offering."
Sebastian believes that once Amazon has its own package-delivery system in place, it could then compete with shipping carriers, just as it leveraged its technology to offer its AWS service to third-parties.
The opportunity isn't just domestic parcel delivery - it's in third-party logistics including freight forwarding and contacted logistics. The "Amazon Transportation and Logistics" (ATL) upside: with a 1% share, it's about a $5 billion opportunity; with a 5% share, a $25 billion opportunity, Sebastian writes.
He believes Amazon may be the only company with the fulfillment/distribution density and scale to compete effectively with global UPS, FedEx, and DHL.
And while it's still early days with lots of challenges, if drone technology becomes a reality, it could provide Amazon with a significant competitive advantage and significantly reduce last-mile delivery costs, he said.
Drones aren't the only outside-the-box ideas Amazon is testing. In September, it announced Amazon Flex
, an Uber-style crowd-sourced delivery method.
And according to a report in yesterday's Wall Street Journal
, Amazon is also testing using newspaper carriers to make package deliveries along their routes. Citing people familiar with the matter, the Journal wrote, "The use of newspaper trucks is part of a broader idea to take advantage of the variety of courier trucks on the road, from flowers to pizza delivery."
If the idea of using newspaper trucks sounds familiar, it's because former eBay CEO John Donahoe floated the idea two years ago. We explored the feasibility
of this unusual package-delivery method at the time.
Given Amazon's move into shipping, the question for online sellers becomes, is that a good thing or a bad thing?