Amazon likely to grow own delivery network to control even more of ecommerce market

After announcing Q4 2017 earnings, Amazon hinted at an intent to manage its own last-mile delivery sector, The Loadstar announced last week. Industry experts believe this indicates the company is moving toward operating as much of its own supply chain as possible.

Given Amazon’s history in other markets, their move into last-mile delivery seems intent on building something to suit their own demands first. In a Supply Chain Dive post titled Amazon wants 3PLs to know they aren’t necessary for the company’s success, there’s a question of whether Amazon is intent on replacing 3PLs entirely.

Whether Amazon truly intends to displace its 3PLs in favor of internal management remains to be seen.

Last mile inefficiencies are problematic, despite ongoing efforts to resolve delays with AI-assisted predictive analytics, more efficient supply chain visibility tracking tools and even mid-route lockers.

While DHL, FedEx and UPS continue to invest heavily in their logistics networks, projects like Amazon’s FBA Onsite — which gives sellers the ability to ship directly from their own storage sites under the Amazon umbrella — unsettle those wondering just how far into its own supply chain the giant’s reach will extend.

Still, industry experts are reluctant to view these moves as an outright declaration of delivery independence. Rather, it appears as though Amazon is issuing a challenge to 3PLs, reminding them that the company intends to control its own supply chain one way or another.

 Their own service won’t be able to replace UPS, FedEx, etc in the short-term. However, as Amazon’s fulfills more orders, the overall costs will come down, allowing them to expand the delivery network. This could happen relatively quickly as there’s no need to recruit businesses to choose their services; Amazon already has control of the carrier choice for all inventory held at their fulfillment centers.
Like every other market, Amazon has entered, UPS & Fedex’s profit margin is Amazon’s opportunity. When you consider the number of places Amazon can generate revenue from any sale, whether they directly own the inventory or it’s sold via a marketplace seller, they have a huge advantage in that they can lose money on the fulfillment process and still be profitable.
It’s looking like another move for Amazon to control more of the e-commerce market, making it increasingly difficult for independent e-commerce businesses to compete.

Andrew @ EcomLoop
EcomLoop founder. I've worked in ecommerce since 2005, beginning with my own ebay store. I've run multiple independent ecommerce businesses on Magento, Joomla, and more recently, Shopify and WooCommerce. I believe marketplaces should be looked at as a sales channel and that all independent businesses should strive to build a direct connection with their audience for long-term success.

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