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Thu Oct 22 2015 12:31:30

Amazon's Big Plans to Disrupt Shipping

By: Ina Steiner

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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?




Comments (17) | Permalink

Readers Comments

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: sasikat9 This user has validated their user name.

Thu Oct 22 13:07:53 2015

We have noticed that lately the last 10 or so packages from Amazon have been delivered by the USPS where they used to come by UPS.

Not sure why they have changed but talked with UPS guy and he stated that Amazon package delivery is down quit a bit.

To bad. The UPS delivery was faster and more professional than the USPS. USPS still takes days to deliver across the state.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

This user has validated their user name. by: Rexford

Thu Oct 22 15:15:10 2015

My question is does anyone really want to deal with a buyer who is driven my instant gratification?

I'm also watching this drone technology closely.  My guess is that a lot of drones will go MIA.  I know if I saw one buzzing around the airspace of my private property I'd have an issue with it.  I see a new sport on the horizon, similar to skeet shooting.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: TomH This user has validated their user name.

Thu Oct 22 15:34:00 2015

I agree with sasikat9 and Rexford.

I've also seen increased USPS delivers versus almost all UPS a year or so ago.

The drone delivery can not be much more than a small, small niche for many years to come.  And, I'm with Rexford, a little at home skeet shooting could be a growth sport.

Except for a few major cities and areas such as NY, Chicago, LA and such, the venturing into a hodge pod of doing their own delivery would be a very costly mistake by them -- I personally don't think they can do it.

As has been mentioned before, they are also going to be facing Walmart more and more. Walmart already has a built out thousands of delivery points (their stores) and a superb, owned transport system which they could much easier than Amazon, turn into a complete to customer home/office, etc. delivery operation.    

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: wellspring This user has validated their user name.

Thu Oct 22 17:40:24 2015

If the newspaper carrier takes over our route, we are in trouble. Sometimes we get a paper, sometimes not. Sometimes its in the box, sometimes on the ground in front of the box. So undependable. Always the same excuse - vehicle breakdown.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: wellspring This user has validated their user name.

Thu Oct 22 17:41:59 2015

P.S. In our area, the newspaper carrier is an individual, who uses their personal car. A car that is about as dependable as the person driving it.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

This user has validated their user name. by: iheartjacksparrow

Thu Oct 22 18:07:56 2015

How many people actually subscribe to physical newspapers nowadays? After subscribing to the Los Angeles Times for about 30 years, I cancelled the subscription approximately ten years ago because the papers were basically going straight to the recycle bin; I got all the news I needed online. The only person I know who still gets a paper delivered is the 88 year old lady across the street who doesn't have an internet connection. Unless Amazon is intending to use former newspaper delivery persons to deliver their packages.  

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

This user has validated their user name. by: Basset

Thu Oct 22 20:18:41 2015

Good point TomH, but Walmart does not have its act together yet. Amazon is still ahead of them, imo.  But,  Wal-mart is the closest contender. The structure is there, including delivery, but they just don't seem to know what to do with it.


Received an email to try '' Wal-Mart Grocery Shopping online with free pick up'' now available in my area. (You compile your list online, then set a time to go there and pick it up. An employee does the shopping.)  I usually buy the same things over & over at WM, so after good experience with walmart.com, why not.

Unfortunately, I can't report a positive experience.  


Problemo

Couldn't get out the starting gate.  Although I use Walmart.com - it does not seem compatible with the shopping for groceries part.  I was redirected to ''Grocery Shopping'' then when I put an item in my Grocery basket - I was prompted to open a new account.  My existing account did not work with this.

I called customer service.  An eBay-esque phone tree.  At last I reached someone who could NOT help me but transferred me to grocery customer service. Another chatty phone tree wanting me to make MORE choices. Then it hung up on me.  

Called local Wal-Mart - After 10 minutes on hold for Manager on Duty, someone became curious about the blinking light on the phone.  Finally a manager?  answered, listened but said he did not know what to tell me. I did not get the impression that he even knew if his store was participating in ''local pick-up''.


So... Rest easy Amazon.  Possibly eBay's laid off IT people went to work for Wal-mart. There are certainly some issues that need to be fixed if they want to compete with Amazon.  BTW, Amazon does have local delivery in some zip codes here, just not mine yet.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: Bloggo This user has validated their user name.

Fri Oct 23 15:14:58 2015

In the unlikely event that Amazon's drone delivery system gets off the ground, it will come to a crash landing soon after the first few injuries occur due to malfunctioning drones dropping out of the sky.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: CypressC This user has validated their user name.
Web Site

Fri Oct 23 15:45:50 2015

If you think about it, it's really amazing that Amazon hasn't made a play to buy UPS.  

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

This user has validated their user name. by: Beanie

Fri Oct 23 16:26:09 2015

Every time I see the word "disrupt" with one of these websites, I cringe and have flashbacks of JD's disruptive innovation, or what it really was, destructive intimidation.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: truevisionary This user has validated their user name.

Sat Oct 24 01:55:06 2015

I knew this was the direction Bezos was heading. I cannot believe the fools at UPS did not see this one coming. Today's consumer wants convenience. They do not want to buy something online then wait 3 days for the item to ship and another 5 days for it to arrive. Bezos will get the 2 hour window and again change the way consumers spend their money. As a seller on Amazon I love their innovation and if they can get my items to a customer in 2 hours or less that means more money in my pocket. The closest outfit is Target. I must admit they ship within 1 day but I am still waiting 5 days for my item. When Bezos masters 2 hour delivery say goodbye to Target and Walmart and most of brick and mortar. Adapt or die.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: koonkat This user has validated their user name.

Mon Oct 26 00:23:46 2015

USPS is better situated to cover every address, a situation that UPS and FedEx aren't really the best at.  I can see a partnership between Amazon & USPS rather than reinventing the wheel.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: Tiffee Jasso This user has validated their user name.

Mon Oct 26 01:24:09 2015

I'm with Rexford. I really do not want to deal with folks who need a gift by Friday afternoon and wait until Thursday evening to order it. Do us all a favor and GO TO THE MALL!

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: Moonwishes This user has validated their user name.
Web Site

Mon Oct 26 03:04:31 2015

It seems like this delivery scheme in any way and shape and form are going to be cutting out the 3P sellers. I sell a product that I have a huge variety but generally only 1-2 in quantity and for the most part only the one. So there is no way something could be shipped from my house and be delivered in California in 2 hours. Even Amazon taking over search and only letting buyers see sellers local to them isn't going to work, since many times I am the only one with the item in the whole USA. Or do they think that if they can't get a delivery within 2 hours, they don't bother showing results and so neither they or me make any money. People NEED to learn a bit of patience. How much of the stuff that is being delivered that fast is really that important anyhow? As the OP mentioned just because you didn't bother getting a present for someone go to the mall, don't expect Amazon to save the day. If they aren't within 2 hours of the mall they most likely they aren't close enough for that newspaper guy delivery either!

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: Ocean This user has validated their user name.

Mon Oct 26 08:59:32 2015

I'm Prime for years and I dislike USPS delivery. UPS & FedEx use to deliver to my door.

USPS could easily deliver to door, leave in "Package Box" with key in my mailbox (like they use to.) I live in apartment building, and USPS has access. Our mailboxes are inside building.

Instead they leave just about all Amazon deliveries with apartment office.

Then I have to "waste my time" waiting in line at office to get packages checked-out. Sometimes no one there, and I have to return twice. Sometimes waiting 15 minutes.

And I don't get text, or email confirmation, from USPS once package is delivered.

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: sanddogg This user has validated their user name.

Mon Oct 26 10:27:01 2015

Megalomaniac Bezos will not be happy until all his workers are robots. I still do not get the Amazon thing. Their performance, although massive,  is overall average as far as I can tell. But personally, I have had most orders from them as unsatisfactory. Tablet delivered without plug, Expensive paper delivered damaged inside of box (box was fine). RUSH for ink paid for overnite and it arrived 6 days later etc etc.  

Amazon's Big Plans to Disrupt Shipping   Amazon's Big Plans to Disrupt Shipping

by: FREDDY This user has validated their user name.

Mon Oct 26 16:19:36 2015

What is the added cost to get it that fast????
I have to watch my money so I don't like to spend more than I have to.

This must be for certain major cities only.  If you live in a small suburb you will be out of luck.

I see a UPS drop off packages at USPS.  Girl at the counter said they have a contract to deliver certain packages for the next day. So it sounds like UPS and USPS  work together at times.

Drones delivery will  never work. Possibly for small envelopes to very rural areas. Then you get those that want target practice, malfunction drones, and a very huge liability problem. All for a package delivery???

Maybe next it will be like a transporter on Star Trek?? Beam me up, Scotty.



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