Amazon originally built out 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).
They’ve also 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 last year, making their own internal shipping business two-thirds the size of UPS.
Amazon was testing a launch of its own competitor to UPS and Fedex. This test was available in Los Angeles and London “offering simpler rates, including the elimination of many fees and surcharges that other carriers add on to pad their revenues.”
Coronavirus is giving UPS a reprieve from having Amazon as a fierce new competitor for retail shipping, though, with Amazon putting the brakes on their test. They need all of their own capacity to meet the surge in online orders during the current shelter in place orders around the country, with much of brick and mortar retail shut down.
Amazon.com Inc. will halt a delivery service for non- Amazon packages, according to people familiar with the matter, as it re-evaluates the nascent offering that competes directly with FedEx Corp. and United Parcel Service Inc.
Amazon told shippers the service, known as Amazon Shipping, will be paused starting in June. It was available in just a handful of U.S. cities.
Under the program, Amazon drivers would pick up packages from businesses and deliver them to consumers, rather than ship orders from Amazon warehouses.
Amazon is reportedly hiring 100,000 warehouse employees and is narrowing its focus for storing and shipping marketplace items to consumer essentials because of the surge that is taxing its own operations. Goods that used to arrive next day or in two days may now take weeks, and they don’t have the spare capacity to continue testing their own UPS competitor.