Amazon is on a spending spree to grow its shipping business and doesn’t just deliver products purchased from its site. The company is now moving freight to external customers in its latest move to compete directly with FedEx and UPS.
“They want to be a new kind of US postal service, where everything can be found anywhere, but also quickly,” said Chris McCabe, e-commerce consultant.
Amazon said in its first quarter earnings report that capital spending increased 80% from a year ago, helping it increase the capacity of its internal logistics network by 50% from a year on the other. According to SJ Consulting Group, Amazon now ships 72% of its own packages, up from 46.6% in 2019.
In 2014, Amazon started building its global transportation network from scratch. still seven years 10 billion deliveries later, Amazon now has 400,000 drivers Worldwide, a fleet of 40,000 semi-trailers, 30,000 vans and more than 70 airplanes. Perhaps the biggest 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 variety of shipping services. In the UK, Amazon has a ‘logistics as a service’ program – a business model that DePaul University researchers plan to launch in the US within the next 18 months, while Morgan Stanley predicted that it will be launched this year. It’s possible. Amazon has quietly started transporting goods on its planes for the US Postal Service, according to an investigation, although analysts say it will not try to duplicate the wide range of services offered by FedEx and UPS.
“They won’t just be that cover carrier that delivers all the packages you want, to any address,” said Dan Romanoff, who does Amazon research for Morningstar. “Amazon sort of chooses its routes. They run and sort the sizes of packages they want to deliver.
Amazon’s algorithms also allow sellers to take advantage of LTL truck space (less than the load) at discounted rates, while allowing Amazon to make money on otherwise wasted space. Amazon seller Keith Gregory started using a program called Amazon Freight. Gregory’s vitamin and supplement company, Highland Laboratories, is based in a town of 3,500 Oregon residents and generates annual sales of around $ 4 million on Amazon. Gregory says Amazon charges $ 1,700 less than FedEx or UPS freight for some of its routes from Oregon to Southern California.
“For us, being in a rural community, the fact that there is someone ready to meet our needs, and they are ready to adjust the pickup schedule and not just say, ‘Okay, we are every day The day will be at 3:30. , of which UPS and FedEx are not affiliated. In that sense, ”said Gregory.
Amazon offers its Fulfillment by Amazon, or FBA, for orders not placed on Amazon.com, which is why some orders from eBay, Walmart, and others arrive at your door in Amazon packaging.
Amazon seller Bernie Thompson said, “There have been times in our business existence where, in fact, Amazon shipped 100% of our orders for all channels, which makes Amazon a multiplier for many consumer electronics products sold by his company. -Channel treatment is called pluggable technologies.
“If you’re going to buy a plug-in on eBay today, it will actually come from an Amazon warehouse and will often be delivered by an Amazon delivery service,” said Thompson.
Rachel Greer, Amazon’s former head of product safety, says the current shipping expansion is reminiscent of a time when Amazon used excessive resources and data to disrupt industry like Prime Video and Amazon Web Services.
“I was part of the process to make sure FBA vendors were compliant over ten years ago. And they were like, ‘Okay, we have excess capacity. Let’s use it, ”Greer said. “And then when AWS started, we had excess capacity. Let’s use it. So certainly if Amazon develops a platform, it works well, and certainly if it will have additional capacity. Then they will try to sell it to someone.
Watch the video to learn more from former Amazon executives and online sellers on how third-party shipping is the company’s next big business.