Amazon to Compete with UPS and Fedex? Not Exactly
Following the same trend that lead to AWS, Amazon Polly, and marketplace sellers, Amazon is now said to be developing a parcel delivery service to compete with UPS and Fedex (that last bit is probably a misnomer).
Amazon is preparing to launch a delivery service for businesses, positioning it to compete directly with UPS and Fedex.
Dubbed “Shipping with Amazon,” or SWA, the new service will entail the online retail giant picking up packages from businesses and shipping them to consumers, according to people familiar with the matter.
Amazon expects to roll out the delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website, according to the people. Amazon then aims to expand the service to more cities as soon as this year, some of the people say.
While the program is being piloted with the company’s third-party sellers, it is envisioned as eventually accommodating other businesses as well, according to some of the people. Amazon is planning to undercut UPS and FedEx on pricing, although the exact rate structure is still unclear, these people said.
Amazon has a history of developing a service internally and then turning it into a revenue generating business (this is why we have such high hopes about Amazon’s foray into healthcare).
Amazon first developed a platform to run its websites on, and then spun that out as AWS. Then Amazon took the warehouse operation it had developed, and more or less started leasing space to third-party sellers (FBA). And then in 2016 Amazon built on the voice synthesis work done for Alexa and launched Amazon Polly.
And of course let’s not forget Kindle Owner’s Lending Library, the free Amazon Prime feature that doubled as a beta test for the Kindle Unlimited platform.
If Amazon sticks to the pattern then the new delivery service will likely be an expansion of Amazon Flex, the gig economy startup that Amazon launched in 2015.
That service only delivers packages from Amazon 's warehouses now, but it already has something like three-quarters of the infrastructure that would be necessary to tell drivers to pickup packages one place and drop them off at another location across town.
This wouldn’t really be a competitor to Fedex and UPS, though; it would be more like a competitor to the gig economy startups that will pick up your grocieries.
Building a true UPS competitor would require picking up and collecting packages at a distribution center, sort them, and then forwarding them to other centers across the country.
Does Amazon have that sorting capacity yet?
image by thisisbos