“We are not seeing any cost-competitiveness at all,” said Gooding.

But it comes with the caveat that it is a difficult time, at the moment, to be cost-competitive, which is the rub, in a sense. If Amazon is able to fill up network space to offset operating expenses, Gooding said is a positive for them, with its network expansion serving as dipping a toe in the water to see if they can bring in non-Amazon types of packages. They need to control their own destiny and need to be able to have available capacity and continue to grow the Prime model and maintain the Prime delivery experience for the subscription base.” But every holiday season the delivery experience takes a bit of a black eye based off a lack of carrier capacity, and that is why you see Amazon go out and buy 4,000 trailers, lease 40 aircraft, and build out a new delivery network. The key to that growth is that 80% of Prime subscribers pay the $120 per year for the perception of free expedited shipping. It did not become financially viable until it rolled out its Amazon Prime subscription model, and it has experienced phenomenal year-over-year growth. We are seeing a very rational, consistent progression for Amazon. Is the endgame for Amazon to go out and effectively compete with UPS and or FedEx for non-Amazon type of delivery? I don’t believe that is the endgame for them. “Is it true that Amazon is trying to build out its own delivery network? It is absolutely true. What much of this comes down to, according to Glenn Gooding, iDrive Logistics President, is that there is what he called a “massive disconnect between Amazon’s brand perception in the marketplace and reality.”Īs an example, he pointed to Amazon’s touting of delivery by drone, which can be viewed as innovative, attractive and technology-driven, but when peeling back the layers and looking at it from what called a lens of sanity, there are many barriers regarding drone usage like the FAA and DOD, local municipalities, anti-terrorism, TSA, and the possibility of counterfeit efforts, too.īut what Amazon’s touting of drones has done is serve as a great marketing vehicle to position the right type of expectations and awareness around its brand, which has translated into everything Amazon does, he noted. “And, to our surprise, these proposals are shockingly non-competitive, and do not seem to pose a long- or short-term threat to FedEx or UPS.” “There is this incredible noise about Amazon Logistics, and many believe it is a…threat to the operations and profitability of UPS and FedEx,” he said. Matthew White, iDrive Logistics strategist, told LM that while doing its due diligence with clients over the past couple of months, it has encountered small proposals from Amazon Logistics to its iDrive Logistics clients, which are not for Amazon FBA or MCF, but for Delivery by Amazon. While these proposals would act as a replacement for the aforementioned competitors, iDrive Logistics explained that this offering from Amazon is not even close to competitive on a multitude of levels, specifically pointing to onerous surcharge application with a poor service level.Įditor’s Note: An Amazon spokesperson told LM that Amazon does not have any residential surcharges or weekend delivery fees.

In short, iDrive Logistics said these pricing proposals from Amazon Logistics go beyond FBA (Fulfillment by Amazon), SFP (Seller Fulfilled Prime), and MCF (Multichannel Fulfillment) and, in effect, serve as proposals that would act as a replacement for FedEx/UPS, and United States Postal Service Priority Mail. Given the frenetic pace in which Amazon has gone about setting up its logistics and supply chain operations, as well as expand its presence, this grabbed my attention, to say the least. Earlier this month, I heard from iDrive Logistics, a Salt Lake City-based small package consultancy, regarding pricing proposals it had obtained from Amazon Logistics.

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