Amazon as a delivery behemoth
50% of Amazon’s US packages
Amazon has been steadily growing its logistics operation over the last decade, and it now delivers more than half of all Amazon packages in the US. “Our AlphaWise analysis shows that Amazon Logistics already delivers ~50% of Amazon US volumes, focused on urban areas,” Morgan Stanley said.
Amazon needs to deliver about 5 billion packages per year. Amazon Logistics delivers about 20% of its U.S. package volumes from a year ago and is now shipping at a rate of 2.5 billion per year.
MS estimates UPS and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year, respectively.
By 2022, Amazon Logistics will reach a volume of 6.5 billion packages per year , far exceeding its estimate for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year.
FedEx and UPS
In its 2018 annual report, published in Feb 2019, Amazon counted companies in “transportation and logistics services” among its rivals. “They had never done that before that day,” Mr. Smith (Founder, Chairman & CEO of FedEx) said. “So we took it seriously.”
In August 2019, FexEx said it decided not to renew the contract when it expires at the end of August, not delivering Amazon packages through its ground network. In June, FedEx said it was ending its air-shipping contract with Amazon in the U.S.
While FedEx is walking away from the largest e-commerce player in the U.S., FedEx is positioning itself as a go-to carrier for Target Corp., Walmart Inc. and the world of retailers that aim to compete with Amazon. [WSJ]
Meanwhile, UPS has been investing heavily to expand its capacity to handle more packages for Amazon and other shippers. UPS reported a surge in the volume of packages going through its air network in the June quarter. [WSJ]
Further, in the 2019 holiday season, Amazon blocked its third-party sellers from using FedEx’s ground delivery network for Prime shipments, citing a decline in performance heading into the final stretch of the holiday shopping season.
Shipping with Amazon
What is more concerning for other shipping & logistics companies is the new “Shipping with Amazon” program, reported by WSJ in Feb 2018.
Amazon expects to roll out the delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website.
While the program is being piloted with the company’s third-party sellers, it is envisioned as eventually accommodating other businesses as well.