Recently, Amazon announced preparations to launch a delivery service for business that will directly compete with UPS and FedEx Corp. They are calling this “Shipping with Amazon,” and this new service will consist of the company picking up packages from businesses and shipping them to consumers. As Amazon is already the leading powerhouse in shipping, delivery, and ecommerce, how much of an impact is this going to have on shipping costs? And, what does this mean in the world of shipping technology?
Amazon is planning to undercut UPS and FedEx on pricing. This is important because Amazon can now contain margin shared with its shipping partners, lower costs through scale, and further stamp itself as a top supply chain partner for online and offline retailers alike. If this were to be successful, UPS and FedEx would likely have to raise their rates in order to remain competitive in the market. In 2017, Amazon spent $13.2 billion on warehousing and other logistics build for its North American operations. Comparably, FedEx and UPS each had around $5 billion is capital spending in 2017. Amazon already has its foot on the gas pedal to surge ahead of the pack and take the lead in delivery services.
There is still some hope, however. The ability to haul and deliver packages for other retailers and consumers on a national level would require the company to dish out tens of billions of dollars – not that they wouldn’t be able to. They would also need thousands of trucks, hundreds of planes and thousands of sorting centers to handle the over-influx of packages each day, according to Wall Street Journal. It is notable that Amazon has only leased up to 40 planes and holds around 300 warehouses in the U.S. Wolfe Research analyst Scott Group noted “Amazon is far away from having enough capacity to handle all of its own shipping, much less having excess capacity to sell to shippers outside its third-party merchants and truly start competing with UPS and FedEx.
To put this into perspective, let’s take a look at the leaders in the industry. UPS has been around for more than 100 years, handling over 20 million packages a day in more than 220 countries. They own over 500 planes and 100,000 delivery cars. FedEx has around 650 planes, 150,000 trucks, and 4, 800 operating facilities GLOBALLY to handle 12 million shipments every day.
Though Amazon has been able to prove a formidable foe through the years, they have a long road before they are ready to compete with UPS and FedEx. “Shipping with Amazon” is entirely possible, but the leading giants have plenty of time to determine how to compete with them. Only time will tell if this will have an impact on shipping rates and what we can expect from them in the future. Ecommerce and shipping technology are changing and adapting constantly so this could mean new technologies are on the horizon.
