Is an Amazon Shipping Reboot in the Offering?

Reports say the e-commerce giant is planning to once again compete with FedEx and UPS

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Various reports published late last week indicated that Seattle-based global e-commerce giant Amazon is in the process of rebooting its Amazon Shipping service that it halted at the onset of the pandemic. The service was designed to compete with the parcel duopoly of UPS and FedEx.

Citing an Amazon spokesperson, an Associated Press report explained that Amazon Shipping allows sellers to ship Amazon orders or products sold on other sites, with businesses required to sell on Amazon in order to be eligible for the service.

“We’re always working to develop new, innovative ways to support Amazon’s selling partners, and Amazon Shipping is another option for shipping packages to customers quickly and cost-effectively,” Amazon spokesperson Olivia Connors said in the AP report. “We’ve been providing this service for a while with positive feedback so we’re now making it available to more selling partners.”

This service was originally rolled out by the company in 2018, with a focus on building out its logistics capabilities all the way through to end delivery, with shipping costs being a strong part of the offering, which it said at the time was poised to increase, due to its business model, while also looking to minimize costs be getting more efficient in that area.

The Wall Street Journal reported that following the launch of this service in 2018, a year and a half later, it ceased its contract with FedEx, which the report said, “increasingly viewed [Amazon] as a competitive threat because of its growing logistics network,” adding that Amazon accounted for roughly 11% of 2022 revenues for UPS. The report also noted that the reason Amazon paused Amazon shipping early into the pandemic was due to Amazon being “flooded with orders in the wake of lockdowns.”

Jerry Hempstead, president of Orlando-based Hempstead Consulting, said this development was good news for shippers.

“If one looks at the public data about parcels in the industry, in the U.S. (UPS, FedEx, USPS), the market is shrinking,” he said. “The demand for Amazon, as well as Amazon using AI to bundle orders to one consumer, has freed up capacity in their network. Amazon returning to be a competitor in the market is going to put additional pressure on the P&L of UPS and FedEx. The negotiating power of shippers is returning.”

Another parcel expert, Rick Watson, founder and CEO, of New York-based RMW Commerce Consulting, observed that while anytime Amazon does something in the market, it requires a watchful eye.

“The competitive dynamics are tough in the market now,” said Watson. “There is more supply than demand, there are more facilities than demand, and services than demand. To me, this speaks to a market consolidation that could happen where bigger players gain share. Remember, Amazon doesn’t operate a truly independent shipping service. It’s a retail marketplace with guaranteed volume that operates a shipping service, of which it is able to offer infrastructure to others at marginal cost. It looks like at the moment, Amazon is cherry-picking larger shipper contracts, and this is just not available to the average shipper. Overall, I think this is the first of many moves by Amazon to open up their transportation networks to the most lucrative customers.”

What’s more, Watson explained that Amazon is replete with what he called the antidote to trust, in the form of rates, service levels, and patience, which he said are three things many companies don’t have, with Amazon typically being content to keep doing what they are doing and wait it out.

When Amazon first introduced this service, it was positioned as a premium ground service at economy rates, with delivery to anywhere in the U.S. within one-to-five business days in eight select cities: Seattle, Los Angeles, Chicago, Detroit, Cincinnati, Dallas, and Baltimore, where there is proximity to a major Amazon hub or sort center, with packages either placed on a line haul next to the closest sort center or placed on route to a delivery location, according to Trevor Outman, Founder and Board Member, for San Diego-based audit and parcel consulting services company Shipware.

“The obvious change [now] is that there are no key cities for pickup, and it doesn’t appear to be an invite only program,” said Outman. “However, the initial capacity logic and business case for Amazon Shipping remains the same. Originally their logic for introducing Amazon Shipping was centered around the fact that they already had their trucks at these customer locations picking up Amazon packages. These trucks were parked right next to FedEx and/or UPS trucks. The Amazon trucks often had extra capacity and so did their network. It’s not a tough business decision to realize it would be profitable to maximize their capacity, and pick up their competitor carrier packages with little to no extra effort applied.

What remains the same is that these services are still for Amazon e-retail-business customers. Amazon still needs to be onsite for these customers to pick up and induct their packages into the Amazon logistics network. Since Amazon is now offering the service nationally, operational nuances such as invoicing details have been worked out since February of 2020. Likely just the beginning before Amazon removes the last caveat of offering Amazon Shipping only to retailers selling through Amazon. Although, the ability to pick up from any location is a large operational leap from their current position which already has assets allocated to each of their customers. We’re in the beginning phases of the evolution of Amazon Shipping which I’ve always said is a matter of when, not if, they’ll become a competitor to UPS and FDX.”

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About the Author

Jeff Berman, Group News Editor
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Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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