Amazon is planning to launch a delivery service for businesses that would help the company "compete directly with United Parcel Service Inc. and FedEx Corp.," according to a Wall Street Journal report.
WSJ, citing “people familiar with the matter,” reported that the new service, Shipping With Amazon, will pick up from merchants who sell through its website and ship to consumers. The service will launch in Los Angeles and expand from there. While starting with its third-party sellers, there are reports that Amazon will eventually roll out to compete directly with its primary logistics partners today.
It may be a pilot, but it has huge implications for distributors – directly and indirectly – as this capability significantly increases Amazon’s control of supply chain costs and its ability to complete the “last-mile” link to the customer.
Recently, we offered our view in our series and report, Your Amazon Business Playbook, that the company’s buildout of e-procurement services is a new and direct attack on distributors. It’s a strategy to displace distributors from the customer relationship, and more threatening long-term than their previous long-tail strategy of capturing non-contract, non-planned commodity purchases.
It is not a stretch to see that FedEx and UPS are about to experience a similar displacement experience with what I assume is their largest customer.
Analysts estimate that UPS gets up to 6 percent of its revenues currently from Amazon, and FedEx 3 percent. Amazon more than doubled its capital investment in warehouses and infrastructure in 2017 to $13 billion. That’s the Amazon version of doubling down.
Amazon’s history has been to first target individual companies and then entire industries, starting with books and CDs. They have captured a relatively small amount of share in wholesale distribution to date. Making smart business decisions is about collecting as much data and triangulating to evaluate the scenarios and likely impacts to your future. It’s not being alarmist to say that Amazon has already boiled a few lobsters that sat in gradually warming water until it was too late.
We also think this announcement today strengthens another point we made in the playbook – that FedEx and/or UPS may be more motivated to consider a competitive strategy that includes a deeper partnership with distributors, e-procurement and e-commerce providers to effectively build a true competitor to Amazon Business.