Amazon may want to launch its own courier service, ambitiously competing with FedEx and United Parcel Service (UPS). But to reach the scale of the United States freight logistics giant, the online retail giant still has a long way to go.
The Wall Street Journal reported on Friday that Amazon is preparing to launch a delivery service for businesses.
The service, entitled “Shipping with Amazon,” is expected to be launched in Los Angeles for independent merchants selling products on Amazon websites. It is expected that it will also be expanded to more cities and external businesses in the future.
However, analysts pointed out that in the future to be able to package delivery services to other retailers and consumers across the United States, Amazon will need to invest tens of billions of dollars. It also requires thousands of cargo trucks and hundreds of aircraft, as well as thousands of sorting centers to handle millions of packages a day.
According to MWPVL International, a supply chain consultancy, Amazon now only hires 40 aircraft and has about 300 warehouses in the United States, including distribution centers, sorting centers and distribution stations. Analysts said the company is now primarily a sign-off contract with shipping couriers rather than owning those assets, which is a limiting factor.
Wolfe Research analyst Scott Group wrote in a research note on Friday that Amazon “is far from being able to handle all of its packages,” let alone having it for its third party Merchants other than sellers provide delivery service, “and really started to compete with UPS and FedEx.”
Compared to the two logistics giants have a huge Amazon first mover advantage. UPS has been involved in the logistics industry for more than a century before entering the Ford T-model. FedEx has also been in the field for more than 40 years.
FedEx now has about 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 worldwide operations and processes about 12 million cargoes per day. UPS business volume is larger, handling more than 20 million packages per day, serving more than 220 countries and regions. Its cargo fleet includes over 500 self-owned and leased aircraft, more than 100,000 package wagons, and other vehicles that package deliveries.
According to MWPVL International, Amazon shipped about 1.2 billion U.S. domestic shipments last year. However, most of these are delivered through US Postal Service, UPS and FedEx.
Paul Thompson, chairman of Transportation Insight, a North Carolina logistics company, said: “The industry is so big that I would be shocked if FedEx or UPS are now scared by Amazon’s next move.”
“Even if Amazon starts to reach a certain level, UPS and FedEx’s last mile business is at risk, and they will not suffer much because of the low rate of return on the business, which we see as marginally low … So losing some of the last mile’s business may not be a bad thing, “Grupp added. Amazon involved in the distribution area, may also urge the two logistics giants to raise prices, because Amazon still rely mainly on them to deliver parcels.
Meanwhile, Marc Wulfraat, president of MWPVL International, pointed out that delivering some parcels can generate extra revenue for Amazon. The “Shipping with Amazon” delivery option will allow the company to use the return carriage of empty vans to transport goods in urban areas where it has deployed logistics infrastructure.
After completing a day’s cargo handling mission, Amazon drivers can ship parcels to their vehicles in third-party sellers’ warehouses. Then, those outbound packages can be shipped to the regional sorting center and then to other markets by truck or plane.
Waufrat said, “They threw 30 parcels on the truck, and then he (the driver) returned to his starting point of dispatch, and now those parcels are in the Amazon ecosystem.”
Amazon further distribution areas, will exacerbate market competition. At the moment, competitors in this space include both established logistics companies and regional and start-up companies trying to find ways to deliver parcels home.
“This is a very competitive area,” said US Postmaster General Megan Brennan last Friday in response to a question about possible further involvement by the Amazon in the logistics industry. “We have to work hard every day. Take this business. “