There has been significant reaction to the launch of Shipping with Amazon news. In case you missed it, you can read more here: Amazon prepare to launch SWA (Shipping with Amazon).
In a small test, currently operating in the Los Angeles area of the United States, Amazon will be taking on the full journey of deliveries for sellers. In effect, they will be operating their own postal service end to end. Although it’s a pilot scheme, it’s also an obvious opportunity that Amazon is well placed to take advantage from. Amazon’s focus on efficiency and logistics is well known and SWA makes sense.
News of the test sparked concern amongst investors that the world’s largest online retailer is keen to disrupt the shipping market. And FedEx and UPS shares were down more than 4% in afternoon trading on Friday. In the UK, Royal Mail wobbled and decreased 1%.
An Amazon spokesperson said of the shipping test: “We are always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices.”
But how big is the challenge? Pundits have played down the short term prospects because the task is so huge to take on the bigger existing players. According to Reuters, Cowen and Co. analyst Helane Becker has estimated that Amazon would have to invest $100bn to build a global network of facilities, planes and trucks to compete with FedEx and UPS. Needless to say, Amazon already has some of that infrastructure in place already.
They have a fleet of ships, airports and fulfilment hubs as well as a their fulfilment facilities. So this new horizon is scarcely a surprise. Indeed, in the past Amazon founder and CEO Jeff Bezos has been critical of Royal Mail because it “did not have the capacity” to handle the volume of Amazon’s deliveries.
We’ll keep you posted.
