In 2019 I told you that Amazon would offer consumers a standalone alternative to UPS and FedEx, something that was delayed by the coronavirus surge in orders – Amazon was using all of their air freight capacity to deliver their own packages.
Now they’re even reportedly shipping packages for the US Postal Service and starting to roll out “logistics as a service” to companies in the U.S.
This makes perfect sense from everything we’ve seen from Amazon so far. For instance Amazon originally built out its server capacity to handle the huge order surge for the Christmas holidays, and found that they had spare server capacity the rest of the year – and a huge capability in managing servers. So they expanded into the adjacent space of cloud computing (Amazon Web Services).
Now they’ve built out a delivery and logistics shipping capacity to handle their own surges, and that gave them tons of extra capacity. Amazon delivers more of its own packages than other shipping services combined. They delivered over 3.5 billion packages a year even before the pandemic, making their own internal shipping business two-thirds the size of UPS.
Amazon has more than,
- 400,000 drivers
- 40,000 trucks
- 30,000 vans
- 70 planes
And since they’re servicing delivery routes already, it’s almost all marginal revenue to pick up and delvier third party shipments. That puts them in a position to undercut competitor pricing. They’ve already tested a lower-priced and lower-fee competitor to overnight shipping services in Los Angeles and London.
Credit: Amazon
It was only just 2016 when the very first Prime Air 767 got its livery. Now if your airline is retiring its 767s it’s probably because of demand from Amazon.
Amazon appears to be succeeding in the world of atoms, not just bits. Cargo by the way is the airline deregulation that everyone agrees worked.
Amazon is going to pick up a lot of business from UPS and FedEx.
It costs about $15 for me from UPS and FedEx to snip an empty box cross country – a box with nothing in it. Amazon is probably paying UPS and FedEx $1. And with their own contractors and gig workers, it’s provably costing them less than $1 a box. si they can go to UPS and FedEx customers and offer to ship their boxes for $5 apiece…undercut UPS and FedEx by $5 – $10 a box, and make a nice profit.
I believe they are going to do to UPS and FedEx what they did to bookstores….
as you point out, that marginal incremental delivery is not going to cost them that much if they a re already delivering to 70% of the country. And the big bulky packages, or small shipments that fit in a mailbox, they can continue to hand off to USPS, FedEx and UPS.
If you’re a software engineer, Amazon is a sh!t place to work. They’ll work you nights and weekends with unpaid, brutal ‘oncall’ because of terrible engineering practices. Other FAANG companies are nowhere as extreme. Oh and Amazon pays the lowest of all FAANG companies, notably stingy in bumping compensation by way of stock refreshers.
Apple, Google, Facebook and Netflix are all hiring. Who knows, you may end up working for me!
I do wonder what shipping market they expect to cut into here. I can see inroads for companies shipping things to residences (admittedly a huge market). Business shipping, I suspect not so much. Amazon is the very last place I will order things from for work, and most of that is because of their unreliable shipping service, including the ability to control delivery. The time savings in being able to order an item in the afternoon and reliably know it will be in my office before noon the next day exceeds almost any shipping costs associated with that service. Amazon just cannot do that. I spend low thousands on freight charges every year (and I am a very small operation); those costs are negligible compared with the costs of labor and project delays.
Go get’m tigers !!!
Amazon just opened up shop in Newport, Delaware that used to be the old GM car assembly plant.
This isn’t news to either UPS or Fedex. Given that they aren’t jumping up and down in panic says they have thought this through.
The real issue is the United States Postal Service. We now have 3 very viable private sector companies that can do everything the USPS does except deliver mail less than 16 oz because the USPS has a monopoly on that sector.
I suspect Bezos and UPS and Fedex are really pushing to get rid of the USPS and not each other.
I have to agree about the postal service. It is awful. They scanned my new Amex card in informed delivery and the card never made it. Packages have gotten stuck and lost in their regional facilities like upstate New York. Things are sent to the south and they never arrive. I found 200 pieces of mail addressed to the same building but different apartments from another part of nyc dumped on the service road of a major highway. This means whoever delivers for that building dumped it in the street. The same location has bundles of magazines dumped occasionally.
The problem with USPS is there are too many untrustworthy people handling your mail and the lack of accountability means theft is rampant. Only if many complaints are submitted for a facility will postal police maybe investigate. UPS and FedEx track each package better and if something is lost they investigate.
Amazon shipping isn’t great either. The Amazon trucks are notorious for marking down an item as delivered when it arrives the next day. Amazon has marked things delivered that never arrive. I have also received products that I didn’t order. Another problem with Amazon is that some items are shipped by air and then given to USPS to complete. This adds another set of problems.
Amazon is a Terrorist Organization. I hope they fail.
“I have to agree about the postal service. It is awful.”
Thank the destructive whirlwind Postmaster General Louis DeJoy for that, with his endless conflicts of interest and terrible decisions to destroy postal equipment and to cripple USPS logistics in order to give more business to private industry.
@Steve M
The postal service has been bad for 15 years. It got worse in 2015 which precedes DeJoy’s leadership. DeJoy is hamstrung by congress, and a leftist controlled postal board and leftist mail carriers union prevent any changes that would make things better.
Amazon is amazing. It is very reliable in my experience almost all of the time. A hiccup can happen but they make it right, quickly and generously, returns and refunds no questions asked.
Now if they would only bring the packages to my office instead of leaving outside behind a bush on a Friday night 2 plus hours after we close. So much for business service.
I use PirateShip.com to ship USPS First Class packages for my online business. They noted that in October USPS will temporarily increase rates for all types of packages across all zones, but that they were going to be offering a new shipping service to nullify those fee increases. I’ll bet it’s this new Amazon delivery service.
Now the only question is will they come to my house and pick it up? Will I still drop at the post office and then it gets sent to a different bin where an Amazon truck picks it up? We will see…