Amazon.com Inc. is experimenting with a new delivery service intended to make more products available for free two-day delivery and to relieve overcrowding in its warehouses, according to people familiar with the plan. The new delivery program is being called "Seller Flex" where the company will pick up packages from third-party sellers selling on its platform and deliver the products to consumers. Amazon accounts for 5 to 10 percent of UPS revenue, according to analyst estimates, while FedEx has said the e-commerce giant accounts for less than 3 percent of its sales.
Amazon.com Inc. is experimenting with a new delivery service intended to make more products available for free two-day delivery and to relieve overcrowding in its warehouses, according to people familiar with the plan. The new delivery program is being called "Seller Flex" where the company will pick up packages from third-party sellers selling on its platform and deliver the products to consumers. Amazon accounts for 5 to 10 percent of UPS revenue, according to analyst estimates, while FedEx has said the e-commerce giant accounts for less than 3 percent of its sales. Last year, Amazon spent 18.5 billion dollars on warehousing, packing, and final mile delivery. The majority of the business has been handled by FedEx and UPS. Both FedEx and UPS are, to say the least, concerned. Stock in both companies fell on the news. Shares of UPS fell more than 2 percent last week. FedEx fell as much as 1.6 percent at its low for the day. Both companies issued vague statements of support making sure to point out the complexities involved in running a global transportation network. I don't know of any large-scale projects Amazon has undertaken that have been unsuccessful. I have to believe Amazon understands fully the complexities to which Fedex and UPS refer.
According to a source within Amazon, the service began two years ago in India, and Amazon has been slowly marketing it to U.S. merchants in preparation for a national expansion. The service began on a trial basis this year in West Coast states with a broader rollout planned in 2018. Amazon declined to comment.
A Move to Gain Independence
For years now, speculation about Amazon’s delivery ambitions have swirled, with some analysts predicting that, beyond solving its own internal logistics problems, it could be an Amazon business unto itself. This project underscores Amazon’s ambitions to expand its logistics operations and wean itself off the delivery networks of UPS, FedEx and other final mile delivery vendors. A rush of last-minute holiday orders in 2013 forced Amazon to issue refunds to shoppers who didn’t get gifts in time, and the Amazon brand took one on the chin, highlighting the perils of being overly dependent on partners for a main part of its business pledge; quick and reliable delivery. Taking over some responsibility for delivery enables Amazon to protect that edge as rivals like Walmart enhance their own delivery operations.
Could the Move Be More Than Just Enhanced Control and Decreased Dependency
There has been industry speculation that this move may be the start of something bigger and more ambitious than what is apparent. FedEx and UPS may not be sweating it yet, but various analysts note the new program may just be another step in Amazon's drive to become a global third-party logistics provider.
Amazon has leveraged its logistics capabilities to offer services to sellers for years.
Among the many Amazon services available include booking space on an ocean vessel via Amazon to ship worldwide. Amazon Prime's logistics services, an asset based provider, provides air and ground transportation, and you can store your inventory at Amazon's facilities. Amazon's vast logistics network, equipment and facilities, and in-house resources may allow it to compete with any transportation provider out there. It's an interesting bit of speculation. Having yourself as your biggest and best customer provides a couple of the most vital components of a successful logistics startup; cash flow and seamless data integration. It will be interesting to see just how far Amazon will take this latest venture. To stay up to date on this topic and more please subscribe to our newsletter @ http://www.Land-Link/blog.
Land-Link, a well respected professional organization, has been providing its clients with effective transportation and logistics solutions since 1978.
