Just like they have done with voice recognition, television, and music, Amazon is making a foray into another business service that will position them head-to-head with industry leaders: this time with UPS and FedEx for delivery services.
Coined “Shipping with Amazon” or SWA, the program was slated for a soft-launch in February in the Los Angeles area and is expected to establish a national footprint throughout the remainder of the year. If launched nationally, the program would involve SWA drivers picking up packages directly from retailers and warehouses and delivering them directly to customers, cutting any other delivery services out of the picture.
Amazon would open up delivery to consumers that live in the 37 cities where they currently make deliveries. For shipments outside of Amazon’s radius, they will rely on the U.S. Postal Service and other carriers to take care of the “last mile” to the customers’ doorsteps.
SWA will be piloted with third-party sellers that already sell on Amazon, in an effort to reduce delivery costs to customers and grant Amazon more control over the entire logistics and delivery process, from start to finish. For those who are familiar with Amazon’s business model, SWA’s announcement is reminiscent of Amazon Web Services, the e-commerce giant’s cloud computing arm. With AWS, Amazon initially built out infrastructure to service its own needs and once that gained success, began selling the tools to third parties. Today, the platform has over a million active customers and has definitely made its mark on the industry.
Additionally, in their 2017 annual report, Amazon mentioned how critical the shipping and delivery pieces are to its business as a whole. They stated, “We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. If we are not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact our operating results and customer experience. Shipping costs, which include sortation and delivery center and transportation costs, were $11.5 billion, $16.2 billion, and $21.7 billion in 2015, 2016, and 2017.
We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services. We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving enhanced operating efficiencies.”
With this, it’s evident that Amazon doesn’t want to be forced into relying on FedEx and UPS for shipping and delivery and instead want to take matters into their own hands in order to maintain their customer-first identity. They are constantly experimenting new ventures on behalf of their customers and businesses that sell on Amazon, in order to create faster, lower-cost delivery options.
Looking to the future, Amazon reportedly wants to open SWA up to businesses with no affiliation to its e-commerce marketplace, so that they will one day be shipping and delivering packages from companies of all sizes and edging out FedEx and UPS with a more affordable pricing structure.