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Amazon's ambitious delivery dream is a nightmare for FedEx and UPS

Jeff Bezos is coming for your business, and he usually gets what he wants

Bloomberg 

Amazon
Amazon

Amazon’s ambition has been in plain sight for years. The company has built its own network of merchandise warehouses and package sorting centres. It enlisted its own airplanes and truck trailers to transport cargo. It registered to move freight across oceans, and in dozens of cities it tapped couriers to deliver packages directly to shoppers’ doors. Brick by brick, Amazon has been building itself into a package delivery company to satisfy not only the voracious demands of Amazon shoppers but also anyone else who wanted to move merchandise from one place to another. None of this has been a secret. Even a hush-hush company like can’t keep jet planes under wraps. But Amazon and its delivery partners such as have had plausible deniability about what’s been happening. When Amazon executives are asked whether they’re trying to become another or UPS, they say those Amazon trucks, warehouses, airplanes and delivery drivers are intended to supplement existing shipping providers when needed and improve service for Amazon shoppers. This explanation wasn’t entirely believable, of course, and Amazon can no longer deny it. Amazon is coming for you, and Maybe not today or tomorrow. But soon. The Wall Street Journal reported Friday that Amazon plans for the first time to pick up packages from businesses and ship them to Initially, the option will be only in Los Angeles and only for that sell merchandise through Amazon’s website. These are baby steps, but they are important symbolically. It won’t stop with one city or one type of customer.

Amazon can’t handle all deliveries on its own yet, but this is the company’s first direct move into and territory. Soon, those bold words from FedEx’s CEO will seem ridiculous. Two years ago, Fred Smith told stock analysts that concerns about Amazon shaking up the package shipping industry were “fuelled by fantastical” reports. “In all likelihood, the primary deliverers of e-commerce shipments for the foreseeable future will be UPS, the US Postal Service and FedEx,” Smith said. Smith was factually correct and also blindingly wrong. It’s clear that Amazon’s delivery service won’t have the scope of UPS, or the Postal Service right away, and maybe not for years. Building a global shipping company is painstaking and expensive work. is 47 years old. Amazon has been earnest about building its own shipping infrastructure only since 2013, when the company’s delivery providers weren’t able to handle a surge of holiday season Amazon orders. But is anyone willing to bet that it will take decades for Amazon to turn its patchwork of warehouses and intercity delivery operations into a full-fledged shipping network? Betting against is never wise, especially when his company has shown it is dead serious about honing its shipping skills. What does dead serious look like? Amazon in 2017 splurged $13.2 billion on warehouses and other logistics buildup for its operations in North America, according to securities filings that combine Amazon’s cash capital spending with its additions of physical real estate under leases and other financing arrangements. That was five times the comparable figure in 2015. For comparison, and United Parcel Service each had more than $5 billion in capital spending over the last year. This spending surge fits Amazon’s pattern: When it sees potential in a new area of business, it puts its foot on the gas pedal. And Amazon executives have ever so slightly changed their message about their package delivery ambitions. Last week, Amazon’s chief financial officer gave the clearest (for Amazon) indication that his company plans to apply its delivery operations beyond Amazon’s own e-commerce deliveries: “Although we have a strong partner network here, we will always be able to leverage our strength and our knowledge about where shipments are going, both within our network and to final that will create opportunities for us.” The CFO didn’t detail what Amazon’s “opportunities” might be, but they are probably the stuff of Fred Smith’s nightmares. T. S. Eliot wrote that the world ends “not with a bang but a whimper.” Business revolutions, though, begin not with a bang but with the first of hundreds of tiny steps. And when Amazon is involved, anyone standing in its way ends up whimpering.

First Published: Sat, February 10 2018. 20:42 IST
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