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Amazon Now Testing Their Own Delivery Service

Here’s a BN-CN122_amazon_F_20140424121541[1]report from the "news which everyone saw coming" department.

The WSJ is reporting today that Amazon is testing their own delivery service in California:

The future of Amazon is hiding in plain sight in a San Francisco parking lot.

There, adjacent to recently closed Candlestick Park, Amazon is testing its own delivery network for "the last mile," the final leg of a package’s journey to consumers' doorsteps. Trucks loaded with Amazon packages and driven by Amazon-supervised contractors leave this parking lot for homes and offices around San Francisco. Similar efforts are under way in Los Angeles and New York.

There’s no solid info on just how long Amazon has been running this test, but if I had to guess I would bet that Amazon’s been building towards this moment for at least 7 years. I first saw a courier drop off and pick up an Amazon order back in 2007, and I have had couriers deliver packages once or twice since then.

But Amazon’s current efforts are a lot larger than simply hiring couriers. Amazon is not just running a pilot; they’re also reportedly looking for space to rent/buy where they can put a truck maintenance facility to replace their more current ad hoc efforts.

At their pilot facility near Candlestick Park, tractor trailers carrying a load of packages from Amazon’s distribution center pull up between pairs of Amazon Fresh trucks and Ryder trucks so packages can be transferred:


A permanent facility would allow packages to be transferred faster and from a single incoming trailer to a larger number of local vans.

And not only is Amazon looking to build or buy a facility, they are also hiring new managers for a service called "Last Mile":

Amazon is growing at a faster speed than UPS and Fedex, who are responsible for shipping majority of our packages. At this rate Amazon cannot continue to rely solely on the solutions provided through traditional logistics providers. To do so will limit our growth, increase costs and impede innovation in delivery capabilities. Last Mile is the solution to this. It is a program which is going to revolutionize how shipments are delivered to millions of customers.

But even that comes as no surprise. Amazon showed their interest in owning their own delivery service when they bought a stake in Yodl, the UK delivery service, last month. As I said at the time:

Even if Amazon doesn’t buy Yodel outright, I still think this deal is a sign that Amazon is going to launch their own shipping service. The retailer has long since grown past the point where it made business sense for Amazon to build and manage their own warehouses, and I think they could be at the point where they are shipping so many items every day that owning their own delivery service could reduce their costs and improve their customer service.

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Rob Siders April 25, 2014 um 1:53 pm

It really only makes sense in markets where the last mile distribution is plentiful, say X number of daily shipments to a given city. Amazon measures everything, so they likely have a sense of where it’ll be profitable and where it will continue to make more sense to have UPS/etc handle it.

fjtorres April 25, 2014 um 3:30 pm

The best complement for an Amazon delivery system won’t be UPS or FedEx, but USPS. By law they have to serve thinly populated, out of the way places and Amazon can always use their own system to get the packages close enough to hand off to USPS.
*If* it comes to that.
Having even a limited alternative to UPS might come in handy come negotiation time to secure if not lower rates, first call rights so what happened last year doesn’t repeat. At least for Amazon.
One thing I find amusing is that all the people goading the state governments to find ways to declare Amazon activities as "presence" to make them collect taxes are now going to find Amazon with a much bigger presence in their state and competing in newer, harder to match ways. This last mile initiative, like the locker effort, will be a nice counter to ship-to-store.
As the ancient greeks used to say: "Be careful what you ask for…"

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