Amazon Takes On Fed Ex & UPS
Australian freight Companies who are already wary of what Amazon will do when they launch have been given new grounds for concern with news emerging that they are looking to take on long term partners Fed Ex and UPS, with their own freight operation.
According to Bloomberg Amazon is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses.
The service has been initally tested in India, and Amazon has been slowly marketing it to U.S. merchants in preparation for a national expansion. It’s not known whether the service will be launched in Australia next year.
How the new service works is that Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, the people said — work that is now often handled by UPS and FedEx.
Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller or distributor.
Handling more deliveries itself would give Amazon greater flexibility and control over the last mile to shoppers’ doorsteps, let it save money through volume discounts, and help avoid congestion in its own warehouses by keeping merchandise in the outside sellers’ own facilities claim insiders.
“Amazon’s final-mile efforts reflect a logical extension of its model as it builds network density,” Benjamin Hartford, a Robert W. Baird analyst, said in a note. FedEx and UPS shares were likely to come under pressure, however, since investors could be concerned about another “data point of Amazon’s encroachment on the broader logistics space,” he said.
The Company claims that Amazon is constantly experimenting to shorten delivery times and reduce costs. It built a network of “sortation centers” around the country, where packages are sorted by zip code and trucked to post offices, with the U.S. Postal Service handling the final mile of delivery since it already has workers bringing mail to every home in the country. ChannelNews understands that Amazon is already working with Australia Post.
It launched Amazon Flex, which uses independent contractors driving their own vehicles to deliver packages from Amazon shipping hubs, guided by a smartphone app. Prime Now offers a limited assortment of products, such as phone chargers and bottled water, in as little as an hour to shoppers in many cities.
Many online merchants who sell on Amazon’s marketplace pay fees to store products in the retail giant’s warehouses, letting Amazon gather and pack products when orders arrive. But the popularity of this service strains Amazon’s capacity during the end-of-year holidays. Online holiday spending in the U.S. will hit $129 billion this year, up 12 percent from a year ago, according to Forrester Research Inc.