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Can Amazon scale its own B2B shipping service?

Amazon is preparing its next big move to control its ever-changing supply chain, with a new service called "Shipping with Amazon".

The company plans to launch the new service in a few weeks, The Wall Street Journal reported on Friday. At first, it will recover the products of third-party sellers who are already working with Amazon and deliver them to customers. The service will eventually extend to merchants who are not currently working with Amazon.

It will be launched in Los Angeles and will expand to other cities in the United States over time, according to the Journal .

According to the report, the new service will reduce the price of UPS and FedEx, even if it contains no details on its pricing structure.

Amazon has confirmed its intention to expand into a new delivery business, but the company has not provided details on schedule or scope.

"We continually innovate and experiment on behalf of customers and businesses that sell and evolve on Amazon to create faster, lower-cost delivery solutions," spokeswoman Kristen Kish told the E-Commerce Times.

The move marks Amazon's latest effort to increase its control over logistics, which have been at the center of the business as it has become the most powerful e-commerce retailer in the United States.

Logistics control

Amazon relied on third party shippers for many years, but these companies tended to be overwhelmed and backlogged during the crucial period of Christmas deliveries.

To cope with shipping problems, Amazon experimented with drone deliveries. He also created a service called "Deliver With Amazon," which allows local delivery services to partner with Amazon to obtain packages for local customers. It has expanded its network of warehouses and distribution centers to locate goods closer to customers. Amazon has also acquired a fleet of cargo aircraft for its Prime Air business and has built a US $ 1.5 billion hub in Kentucky.

Amazon last week
launched Prime Now, a two-hour delivery service for its Whole Foods markets. Deliveries can include fresh produce and meat as well as many other items. Prime Now has debuted in Austin, Dallas, Virginia Beach and Cincinnati, and Amazon plans to expand nationwide during the year.

More than 5 billion items were shipped through the Amazon Prime membership program last year, according to the company. Two-day delivery fees are free for Premium members, while the day, night and day delivery charges usually require a fee.

WSJ's suggestion that Amazon's delivery service will compete with FedEx and UPS, indicates "a basic lack of understanding of any global transportation industry" said Patrick Fitzgerald, vice president for marketing and integrated communications at FedEx.

FedEx has a network of 650 aircraft, 400,000 people, tens of thousands of stores, drop boxes and naval centers, 150,000 vehicles and other facilities, he told the E-Commerce Times.

UPS will continue to support Amazon and all other important customers, spokesman Glenn Zaccara said. However, the company declined to specifically comment on Amazon's latest business strategy.

For UPS, "there are tremendous opportunities in B2C [sector] and more growth to come," he told the E-Commerce Times, "regardless of how d & # 39; other companies may change strategy. "

UPS has announced an 8% growth in its business figure in 2017, a very good sales figure per piece and an average annual improvement of 2.9%, which stood at # 1. 39; upper end of its range of 2 to 3%, stressed Zaccara. The parcel volume of the company has increased by about 4.5% to 5.08 billion.

Holiday crush

UPS has planned to deliver 750 million parcels during the holiday season last year, announced in December – 40 million more than its previous year shipments of 712 million parcels.

The record shopping that took place during last November's Black Friday weekend created a bit of pressure on leading shipping service providers, causing UPS to prevent delays.

Transportation costs are among the largest and most troubling in e-commerce, said Jill Dvorak, senior director of digital retail at the National Retail Federation

They can go from 10 to 20 percent of costs, depending on the carriers, the pricing tables and the size of the product, she told the E-Commerce Times.

"Amazon's decision to add delivery services for its business customers is a demonstration of how they work to enable end-to-end customer-driven experiences for everyone, "said Scott Webb, president of
Avionos.

"B2B – and especially the supply chain – has been slow to innovate with innovative technological solutions simply because it usually works with big products more deeply rooted in traditional commerce" , did he declare. Commerce Times.

"They can buy planes, trains and automobiles, but until they stop shipping as much air, I do not see Amazon improving the profitability of inland navigation, "said Paula Rosenblum, Managing Partner at RSR Research.

Amazon begins calling third party "Prime" senders. However, they often fail to meet the deadlines you see with orders fulfilled through Amazon itself, she told the E-Commerce Times.
Some of these shipments may take eight days against two to three days of Amazon, noted Rosenblum. Setting up its own shipping service could help Amazon reduce these discrepancies.


David Jones is a freelance writer based in Essex County, New Jersey. He wrote for Reuters, Bloomberg, New York Crain Business and The New York Times

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