Two of the most innovative companies in the world are Google and Amazon. They’re impressive in similar ways. They’ve built capabilities, scaled them, and used their new internal capacity to compete aggressively in adjacent industries.
No one can touch what Google has done in artificial intelligence at scale. They built and effectively managed large scale data storage, and branched out to manage web services for other companies (Google Cloud). They used the data storage and search capability to offer e-mail, which they scan to learn tremendous amounts about their customers.
When I receive an email with travel plans, Google knows where I’m going. They know where I have dinner reservations, too, and tell me when I should to make it to a restaurant on time. They’re embedded in my phone through its operating system, and track location. There’s no company with the kind of integrated understanding of habits, preferences, and plans that rivals Google.
Amazon, too, needed to build huge storage and bandwidth. Their volume of e-commerce is breathtaking, but it also spikes significantly during peak buying periods like Black Friday. They needed to be able to manage Black Friday traffic, but once built those systems were ripe for leasing out to other companies (Amazon Web Services). They began by selling books, grew into areas like music, and now sell everything. They’re in grocery delivery, and have experimented and pulled the plug on experiments aggressively (Groupon didn’t eat the world, and neither did Amazon Local).
Just as Amazon built up server capacity for its own needs before offering that capacity for sale, Amazon has built its delivery network to manage its own package delivery – but will eventually take on UPS and other shipping services, and will do it with the same relentless focus on understanding what customers want and delivering that to them.
Amazon now delivers more of its own packages than UPS and FedEx do. They’ll deliver over 3.5 billion packages around the world in 2019. That alone is two-thirds of the volume of all UPS deliveries on behalf of all of their customers.
The Amazon package business may exceed FedEx volume in 2020 and UPS volume in 2021. Amazon reports that they employ 90,000 workers at U.S. delivery stations. They have a network of independent drivers in branded vehicles. They’ve built the scale to deliver Christmas, but Christmas comes only once per year.
While they’ve told investors that their delivery network will ultimately bring down their shipping cost, that seems like a very limited piece of what it’s all about. It guarantees them the capacity they need, it might even lower their cost, but they’ve built an asset that’s only so far deployed in a limited way. Offering their shipping services throughout the world to other merchants could put them in direct competition with UPS generating $7 billion in revenue within 2-3 years.
Additionally, Amazon has begun offering a shipping service — dubbed Amazon Shipping — to merchants in some areas that would include non-Amazon deliveries as well, putting the company into direct competition with its current big partners like UPS and USPS. In these instances, Amazon would act in many ways like a traditional shipping company, handling everything from picking up orders at a merchant’s warehouse to executing the final delivery to their customer’s door. Morgan Stanley estimates that Amazon Logistics could be handling 1.5 billion to 3.5 billion non-Amazon packages by 2022, adding at least $7 billion in revenue to Amazon’s overall business.
Groceries (and delivery services like Instacart) are having to contend with Amazon in food delivery. Amazon (the bookseller) and Google (the search engine) are now dominant players in cloud computing. Will Amazon’s next big move be to disrupt air cargo?
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, which is an area Google hasn’t managed to crack yet. Cargo by the way is the airline deregulation that everyone agrees worked.