In 2014, Amazon shipped about 0.2% of all US packages. Today, Amazon controls a fifth of the delivery market and is on track to overtake UPS and even the United States Postal Service (USPS), according to Pitney Bowes logistics company data.
Data released in sept. shows that the e-commerce giant has now dethroned FedEx as the third-largest parcel carrier in the United States and is just behind UPS, the only private company that delivers even more parcels than Amazon.
Amazon relied heavily on FedEx and UPS to deliver packages to its customers. But the company changed his strategy after a disastrous 2013 holiday shopping season in which delivery services failed to keep up with the torrent of freebies US shoppers ordered from Amazon, resulting in widespread delays. The following year, Amazon accelerated the construction of its own distribution centers and began building fleets of semi-trucks, cargo planes, and delivery vans. Since then, Amazon has gradually shifted its deliveries from FedEx and UPS to its internal logistics operations.
So far, the e-commerce giant has focused on delivering its own packages. But the explosive growth suggests Amazon may soon enter the delivery market. Analysts believe Amazon is set to launch a standalone delivery service in the United States in a few months. The new unit would compete with UPS and FedEx for package delivery for outside companies, putting additional pressure to make delivery routine within two days or the same day.
Amazon Logistics poised for explosive growth
Amazon Logistics, the e-commerce company’s delivery division, has already grown sufficiently to meet most of the company’s internal needs; now handles two-thirds of Amazon parcel deliveries. But even so, Amazon has considerably increased its expenses on logistics infrastructure. It’s buying dozens of cargo planes, opening up multi-billion dollar cargo handling facilities, and hiring of 125,000 new delivery drivers and warehouse workers in the USA.
For Morgan Stanley analysts, this is solid proof of Amazon’s delivery business will be launched within 18 months. Indeed, Amazon is already quietly handle some packages for the US Postal Service, its biggest competitor in the US delivery market.
If Amazon opens up its delivery services to more outside companies, the company can leverage billions of dollars in internal logistics investments, just like it did when it turned Amazon Web Services into a extremely profitable subsidiary.
So far, Amazon Logistics has failed to catch up with its US parcel delivery rivals in terms of revenue. But maybe that’s only because it offers below-market rates to its main customer, its parent company Amazon. Amazon Logistics collects about $ 4.28 in revenue for every package it delivers, compared to $ 12.19 for UPS and $ 17.95 for FedEx, according to Quartz’s analysis of Pitney Bowes data.
Since its marketplace activity subsidizes its delivery infrastructure, it can afford to keep prices low while making profits. Assuming Amazon raises shipping prices for external customers, the e-commerce giant could itself become the market leader in another industry.