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Amazon May Compete with FedEx and UPS' Package Delivery Business!

 

Amazon May Compete with FedEx and UPS’ Package Delivery Business!

 

In 2014, Amazon bought 25% of a small but growing package delivery company in France named Colis Privé. Colis Privé said that it will continue delivering packages for it’s current clients and has no plans to be exclusive to Amazon.

Sometime in the first quarter of 2016, Amazon is expected to buy the remaining 75% stake in Colis Privé. After owning 100% of Colis Privé, Amazon could start making big changes in how Colis Privé does package delivery, or maybe not, as there are no details yet. But it will then be competing directly with FedEx, DHL and UPS. They will definitely be competing in the French and regional market but not just yet in the US market. This acquisition is the biggest step that Amazon has taken to get some control of package delivery and try to lower costs associated with its package deliveries.

 

Amazon is Building its Own Package Delivery Network

Some analysts believe that online retailer Amazon, may be building an alternative package delivery service so that it is not totally dependent on current delivery leaders FedEx, UPS and DHL. It looks like Amazon wants to be less dependent on FedEx, UPS and DHL as its delivery services have suffered delays whenever any of these carrier had problems in delivery. Amazon thinks that carriers are unable to keep up with the surge in package deliveries and believes it could do better if it had it’s own hand in some of it’s delivery services.

These events support that theory:

  • Amazon added thousands of trucks to its US fleet to handle the increased loads it is shipping.
  • Amazon may soon be purchasing 4.2% of Yodel, a UK package delivery company. It received approval for the Yodel acquisition in 2014 but has not acted on the purchase yet.
  • Amazon is negotiating to lease 20 Boeing cargo jets. It is believed that it’s planning to use these cargo jets to expand it’s Amazon Cargo services trial in Wilmington, Ohio.

Analyst Colin Sebastian of Robert W. Baird & Co, believes that Amazon is not looking to use it’s delivery services exclusively for itself. It makes business sense to offer any excess cargo capacity to other companies that need to ship their products. It will definitely help in lowering costs if it goes that route. Amazon is good in getting into other markets and then using profits from those markets to keep its main business costs low.

“They have the opportunity to disrupt this market and generate a lot of revenue, because the global order fulfillment market, which includes shipping and warehousing goods, represents a $400 billion to $450 billion business.”
— Colin Sebastian.

 

UPS and FedEx aren’t Commenting Much

FedEx has not commented much on this development other than to say that Amazon is a valued customer and that FedEx’s vast delivery and logistics network is not an easy feat to accomplish.

“FedEx is a highly integrated global transportation network, in fact, one of only two operating at a significant scale in the United States today, and only one of three major delivery networks in the U.S. — the other two being UPS and the United States Postal Service. That’s not likely to change in the foreseeable future, as these networks are very capital-intensive and information-intensive.”
— Frederick W. Smith, FedEx chairman, president and chief executive,

 

UPS noted in its annual 10-K filing with the SEC in 2014 that if Amazon does go through with it’s plans of building its own delivery network, UPS may not be able to meet its growth forecasts and that will definitely impact it’s long term financials.

 

Bottom Line

Just like any business, Amazon is looking out for itself and it’s customers. It needs an efficient package delivery network and it needs to lower costs. It also needs to be less dependent on carriers that slow down it’s deliveries whenever they have any problems. If Amazon can do that by acquiring and slowly building its own package delivery network, then more power to it.

 

 

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