Why Shipping with Amazon SWA is no surprise

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The WSJ reports that Amazon are to launch ‘Shipping with Amazon’ in Los Angeles before rolling it out across the US and doubtless around the world in the major territories the marketplace operates in. Amazon as a business have made many services available to third parties over the years so Shipping with Amazon is no real surprise, we’ve been expecting it.

  • Amazon started as a retailer, built a massive client base and then made their retail operations available to merchants through Amazon marketplace.
  • Amazon needed a robust computer infrastructure so they built a cloud network and then rent this out to third parties as AWS.
  • Amazon built warehouses and then started to rent space in these warehouses under their FBA programme.
  • In recent years, we’ve seen Amazon build their own carrier service known as Amazon Logistics and it was almost a foregone conclusion that this would be offered to third parties at some point. It appears that time has now come.

Renting out services makes sense for Amazon, it helps them scale their business in a profitable manner as well as giving them greater control over the experience on Amazon. Building out a retail operation worldwide is horrifically expensive from a stock perspective so Amazon allowed third parties to fill stock gaps at no cost to Amazon (they make profit by charging fees). A worldwide distributed cloud cost billions to build but by renting space on their servers Amazon could justify expanding faster giving them a more robust worldwide network for their own use.

Warehouses enable Amazon to locate stock ever closer to the consumer and again renting space makes building new warehouses financially viable. Now building their logistics network Amazon will be able to expand ever faster as third parties will help to keep the network operating at full capacity as it grows.

Further Reading

Read our our article discussing how Amazon will disrupt the courier industry as SWA rolls out.

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