Amazon takes steps to own the last mile
Authenticating rumors in the marketplace, Amazon is indeed testing its own delivery network in the U.S., according to an extensive report last week in The Wall Street Journal.
The test, which further confirmed a report in early March on DCVelocity, was identified by a number of Ryder trucks in a parking lot at San Francisco’s Candlestick Park alongside AmazonFresh trucks as well as packages reaching Bay Area residents with labels reading "AMZL" and "AMZN_US." Similar efforts were said to be under way in Los Angeles and New York.
In its annual shareholder letter, CEO Jeff Bezos also noted that Amazon had "created our own fast, last-mile delivery networks in the U.K. where commercial carriers couldn’t support our peak volumes."
Building its own network of trucks could be a money saver with shipping expenses as a percent of sales increasing every year since 2009. It also offers flexibility, including potential drop-offs at night or at specific hours.
But a fleet would ultimately provide Amazon control of the "last mile" — the final leg of the online purchasing process. The project was said to have received greater urgency after Amazon packages delivered by UPS and FedEx missed promised delivery dates this past holiday.
DCVelocity reported that Amazon’s privately held fleets would serve the U.S.’s top 40 markets, extending efforts already developed around AmazonFresh. Regional parcel delivery carriers and the USPS would serve the remaining markets.
The Journal report noted that it could take Amazon years or decades to match the efficiency of UPS and FedEx. The scale both carriers enjoy would also be missing.
But it also comes as Walmart with Walmart To Go and Google with Shopping Express are already exploring their own delivery fleets. A source also told DCVelocity that Amazon’s fulfillment executives don’t believe UPS and FedEx are investing enough in equipment and infrastructure to support Amazon’s growth.
Wrote Darrell Etherington for TechCrunch, "Amazon clearly foresees a time when it might not be able to cost-effectively lean on others while remaining as competitive as it needs to be in the growing e-commerce market."
- Amazon, in Threat to UPS, Tries Its Own Deliveries – The Wall Street Journal (sub. required)
- Amazon plans revamp of U.S. shipping with mix of private fleet, regional carriers, USPS – DCVelocity
- Amazon Testing Its Own Parcel Delivery Network, Says WSJ – TechCrunch
- Google Plans Same-Day Delivery Expansion – Siliconbeat
- Walmart Is Expanding Its Same-Day Delivery Fleet in SF – Racked
How important is it for Amazon to eventually establish its own wide scale delivery network? Is the over-reliance on major carriers a weakness in the e-commerce model for big online retailers?