Amazon Evolving Into a Parcel Delivery Company, Competing With FedEx and UPS?
Amazon.com has been testing the use of its own delivery vehicles in Los Angeles, New York City and San Francisco following an earlier pilot in the U.K.
Industry insiders have stated that Amazon intends to slowly roll out its own delivery fleet — branded as Amazon Logistics — until it eventually covers the top 40 domestic markets, representing about half of the U.S. population. Deliveries to the rest of the U.S. would eventually be handled by the U.S. Postal Service principally, and to a lesser degree, regional carriers.
There are many factors driving Amazon's exploration of parcel deliveries, perhaps the most significant of which is cost. Higher shipping and fuel surcharge costs limited much of the company's profits in 2013, and were cited as reasons Amazon was forced to raise the cost of Amazon Prime from $79 to $99.
In addition to cost, Amazon's move to handle package deliveries is undoubtedly the outcome of the well-publicized failures of UPS, FedEx and the U.S. Postal Service during the 2013 holiday season. Amazon will do everything in its power to avoid another customer and public relations fiasco like it faced this past holiday season.
Finally, the move will allow Amazon to offer same-day delivery service to more customers, on more products, in more markets. Same-day service, both through Amazon's fleet as well as delivery partners, is now being offered in Baltimore, Boston, Chicago, Dallas, Indianapolis, New York, Phoenix, San Bernardino, San Francisco, Seattle and Washington, D.C.
Amazon to Compete With UPS and FedEx?
Does Amazon's move mean it will compete with UPS and FedEx and become a third private player in the U.S. parcel delivery market? Certainly it will have an impact and could begin to manage inventory, fulfillment and delivery for other consumer products businesses.
It's an enormous undertaking, however. Parcel delivery is a very difficult business, and it relies on three things, each of which has a tendency not to work perfectly every time: people, vehicles and technology. An internet search of customer feedback on Amazon-handled deliveries in San Francisco and the U.K. revealed a lot of dissatisfaction with the delivery end of the transaction.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.