How Amazon is shipping for third parties to compete with FedEx and UPS

Amazon is on a shopping spree to expand its mail order business and is not satisfied with just delivering products that were purchased on its own website. The company is now moving cargo for outside customers in its latest move to compete directly with FedEx and UPS.

“They want to be a new breed of US postal service that gets everything everywhere, but also quickly,” says ecommerce consultant Chris McCabe, who was a seller performance investigator at Amazon from 2006 to 2012.

Amazon said in its earnings report for the first quarter that capital expenditures were up a whopping 80% year over year, which helped increase the capacity of its internal logistics network by 50% year over year. According to SJ Consulting Group, Amazon now ships 72% of its own packages, up from 46.6% in 2019.

In 2014, Amazon began building its global transportation network from the ground up. Seven years and 10 billion shipments later, Amazon today has 400,000 drivers worldwide, 40,000 articulated trucks, 30,000 vans and a fleet of more than 70 aircraft. Perhaps the largest investment to date is the new $ 1.5 billion Amazon Air hub, which opened in Kentucky in August.

Amazon already offers a variety of shipping services for external retailers. In the UK, Amazon has a “Logistics as a Service” program – a business model that researchers at DePaul University predict Amazon will launch in the US in the next 18 months, while Morgan Stanley predicted it will be in the US could happen this year. According to an investigation, Amazon has already started quietly moving cargo on its planes for the U.S. Postal Service, although analysts say it won’t attempt to replicate the wide range of services provided by FedEx and UPS.

“You won’t just be that ceiling beam delivering any package you want to any address,” said Dan Romanoff, who researches Amazon for Morningstar. “Amazon chooses their routes, so to speak. They want to run and sort the package sizes they want to deliver.”

Amazon’s algorithms also allow sellers to use LTL truck space (less than loaded) at discounted rates, while Amazon can make money on otherwise wasted space. Amazon seller Keith Gregory has just started using the program called Amazon Freight. Gregory’s vitamin and dietary supplement company, Highland Laboratories, is based in a city of 3,500 in Oregon and has approximately $ 4 million in annual sales with Amazon. Gregory says Amazon charges up to $ 1,700 less than FedEx or UPS Freight on some of its Oregon to Southern California routes.

“For us in a rural community, the fact is that someone is ready to take care of us and they are ready to meet pick-up times and not just say, ‘Okay, we’re there at 3:30 p.m. every day,” is also very attractive. So not just the price piece, but the fact that they are also willing to use their huge fleet of vehicles for our logistics, which UPS and FedEx do not cooperate in this sense, “said Gregory.

Amazon also offers its Fulfilled By Amazon or FBA services for orders that weren’t placed on Amazon.com, which explains why some orders from eBay, Walmart, and others come to you in Amazon packaging.

“There have been times in our company’s existence when Amazon really shipped 100% of our orders across all channels,” said Amazon seller Bernie Thompson, who does what Amazon calls multi-channel fulfillment for many of his company’s consumer electronics sold. Pluggable technologies.

“When you buy a plugable product on eBay today, it actually comes from an Amazon warehouse, and very often it is delivered by an Amazon delivery service,” Thompson said.

Former Amazon product safety manager Rachel Greer says the current shipping expansion is reminiscent of other times when Amazon used immense resources and data to revolutionize an industry, such as Prime Video and Amazon Web Services.

“I was part of the process to ensure FBA sellers were compliant more than a decade ago. And they said, ‘Well, we have overcapacity. “And then, when AWS started, we had overcapacity. Let’s use it. So when Amazon develops a platform it works fine, of course, and if there is overcapacity they will of course try to sell it to someone. “

Watch the video to learn more from former Amazon executives and online sellers about how third-party shipping is the next big thing in the business.

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