Amazon is not primarily known as a logistics company, but in 2020 the company shipped more parcels than FedEx. Why it matters: Logistics is a $1.5 trillion business — and it has long been controlled by a handful of key players, like FedEx, UPS and the U.S. Postal Service. Now Amazon is poised to conquer it. What’s happening: Amazon has 21% of the U.S. shipping market — right behind UPS (24%) and ahead of FedEx (16%). The USPS remains dominant with 38%, and all other shippers account for just 1% of the market, according to Pitney Bowes, which tracks the global shipping and e-commerce industry. - Amazon’s rise is remarkable, as it had a zero share of the U.S. shipping market as recently as 2014, and it relied on legacy shippers like FedEx and UPS for all its deliveries.
- Since then, Amazon has poured resources into building a network of warehouses, trucks, planes and delivery drivers. As it strengthened its own shipping arm, Amazon took its business away from the other shippers.
- Now, the company is turning shipping from a cost to a source of revenue by offering its logistics capabilities as a service
But: Amazon still leans on legacy shippers for the last mile, that means even though more packages are coming from Amazon’s shipping apparatus, they’re getting passed off to other companies along the way. The rise of Amazon is quite incredible, clearly one of the biggest winners from the lockdown, a service level like no other in their space and a single-minded approach to dominating the market.It will be interesting to see what areas they inevitably move into next to remove as many third parties as possible and ultimately ‘friction’ for their consumers, namely all of us!Could we consider a market where Amazon move into the on-premise delivery space to compete with the established wholesalers and what would that mean to the existing value chain model? Clearly beer and chilled storage is specialised, plus both the vehicles and delivery teams are uniquely trained and set up for delivery and collection, however you have to say, wholesalers of wines, spirits & soft drinks in the supply chain must be now looking over their shoulders as they are already under pressure for drivers and the cost per serve pressure is now beginning to be passed onto operators who in turn will have to pass onto consumers, but there will be some operators who feel they simply cannot pass on increased costs due to their operational model so will start to look for alternative low cost delivery solutions for the same product. The question will probably come down to whether Amazon think there is an opportunity for additional profit generation within their existing fleet and network of logistic depots rather than could they do it as they have shown us all that they can pretty much do anything if they put their weight and imagination behind it. Interesting times. |