Connect with us

TOP BREAKING NEWS!

How Amazon’s Shipping Empire Is Challenging UPS and FedEx


Financial

How Amazon’s Shipping Empire Is Challenging UPS and FedEx

https://www.wsj.com/articles/how-amazons-shipping-empire-is-challenging-ups-and-fedex-11567071003?mod=hp_lead_pos5

Amazon.com
Inc.


AMZN 0.14%

’s recent breakup with longtime shipping partner

FedEx
Corp.

shows how far the e-commerce giant has come in creating its own delivery network.

Over the years, Amazon has played down its ambitions. But as consumers flock to its site for everything from toilet paper to TVs, Amazon has quietly blanketed the nation with hundreds of sprawling suburban warehouses and neighborhood package-sorting centers, flooded the streets with tens of thousands of vans and even taken to the airways. The costly effort is enabling Amazon to control how goods reach its customers—and increasingly turning it from a customer of delivery companies into a rival.

Here is a look at Amazon’s vast shipping empire.

Storing, Sorting and Shipping

The 2013 holiday season was a turning point for Amazon, after orders overwhelmed carriers in the U.S. and led to late packages and upset customers. Since then, Amazon has multiplied the number of fulfillment, sorting and other delivery facilities from about 65 to roughly 400, according to an analysis of data from logistics consultant MWPVL International; before 2005, it just had three fulfillment centers for the entire country, MWPVL said.

Delivery facilities added across the U.S.

Food Distribution

Centers

Distribute orders for Amazon Pantry, Amazon Fresh and Whole Foods

Smaller facilities designed to aggregate boxes into a defined grouping of ZIP Codes. Also includes a few hubs at airports.

Near centers of large metro areas; stocked with popular items for Prime Now customers to receive as quickly as within an hour

Massive warehouses with a large variety of products; fill customer orders

Close to metro areas, often near airports; sort packages for last-mile delivery

Delivery facilities added across the U.S.

Food Distribution

Centers

Distribute orders for Amazon Pantry, Amazon Fresh and Whole Foods

Near centers of large metro areas; stocked with popular items for Prime Now customers to receive as quickly as within an hour

Smaller facilities designed to aggregate boxes into a defined grouping of ZIP Codes. Also includes a few hubs at airports.

Massive warehouses with a large variety of products; fill customer orders

Close to metro areas, often near airports; sort packages for last-mile delivery

Delivery facilities added across the U.S.

Food Distribution

Centers

Distribute orders for Amazon Pantry, Amazon Fresh and Whole Foods

Smaller facilities designed to aggregate boxes into a defined grouping of ZIP Codes. Also includes a few hubs at airports.

Near centers of large metro areas; stocked with popular items for Prime Now customers to receive as quickly as within an hour

Massive warehouses with a large variety of products; fill customer orders

Close to metro areas, often near airports; sort packages for last-mile delivery

Delivery facilities added across the U.S.

Smaller facilities designed to aggregate boxes into a defined grouping of ZIP Codes. Also includes a few hubs at airports.

Massive warehouses with a large variety of products; fill customer orders

Close to metro areas, often near airports; sort packages for last-mile delivery

Food Distribution

Centers

Distribute orders for Amazon Pantry, Amazon Fresh and Whole Foods

Near centers of large metro areas; stocked with popular items for Prime Now customers to receive as quickly as within an hour

Amazon has planted facilities near city centers across the country to be as close to each customer as possible. That has enabled Amazon to deliver more packages to doorsteps within a day and cater to demanding online shoppers. This year it started to shift the standard free two-day shipping option for its Prime members to one day.

Areas with access to free same-day and/or one-day shipping, in square miles

Big Spender

Amazon’s aggressive pursuit of greater shipping control and speed has raised the amount it spends on shipping and fulfillment. Over the past decade, those costs have risen from about $5.5 billion in 2010 to about $61.7 billion in 2018, and they now equal more than a quarter of Amazon’s revenue.

…and those costs as a percentage of sales

Amazon’s shipping and fulfillment costs…

Amazon’s shipping and fulfillment costs…

…and those costs as a percentage of sales

…and those costs as a percentage of sales

Amazon’s shipping and fulfillment costs…

Amazon’s shipping and fulfillment costs…

…and those costs as a percentage of sales

Prime Time

A big driver of those skyrocketing costs? Amazon has rapidly signed up subscribers to its Prime membership, which promises fast, free shipping on more than 100 million items. It spent more than $800 million alone in the second quarter to shift its standard free shipping option to next-day from two days.

Amazon’s Prime membership has topped 100 million subscriptions in the U.S., according to equity research firm Consumer Intelligence Research Partners. At $119 a year, Prime memberships helped boost Amazon’s subscriptions revenue 37% in the second quarter from a year prior.

A Step-By-Step Blueprint For Making Money Online, That Is 100% Dummy Proof!

GET EASY FREE TRAFFIC + AFFILIATE OFFER = COMMI$$IONS

Get The Simple Traffic Blueprint Now!

U.S. Prime subscription estimates

Annual Prime subscription price rises to $119 from $99

Amazon’s first annual “Prime Day”

105 million

Prime

members

Amazon purchases Whole Foods

Amazon says over 10 million items available for one-day shipping

Annual Prime subscription price rises to $119 from $99

Amazon’s first annual “Prime Day”

105 million

Prime

members

Amazon says over 10 million items available for one-day shipping

Amazon purchases Whole Foods

Amazon’s first annual “Prime Day”

Annual Prime subscription price rises to $119 from $99

105 million

Prime

members

Amazon says over 10 million items available for one-day shipping

Amazon purchases Whole Foods

Amazon’s first annual “Prime Day”

Amazon purchases Whole Foods

Annual Prime subscription price rises to $119 from $99

Amazon says over 10 million items available for one-day shipping

105 million

Prime members

Heavy Lifting

Amazon is no longer handling a small glut of overflowing orders. It is the primary carrier of its brown boxes. The shift over the past few years is staggering.

Amazon now delivers nearly half of its orders, compared with less than 15% in 2017, according to estimates from research firm Rakuten Intelligence. It is now handling an estimated 4.8 million packages every day in the U.S., according to MWPVL International. The U.S. Postal Service, once the primary carrier of Amazon parcels, delivers about half the share of packages than it did two years ago.

“We have great partners in our traditional carriers and appreciate all the work they do in delivering packages to our customers,” an Amazon spokeswoman said.

By Land, Sea and Air

All of this means Amazon needs more ways to transport its increasing volume of packages. Last year it created a program where entrepreneurs with their own delivery companies could begin delivering packages in Amazon-branded trucks, and it also pays contracted drivers through its “Flex” program to drop off packages using their own cars. Amazon also recently introduced a program that will give its existing employees as much as $10,000 to start their own local package-delivery business.

In June, Amazon said it would rent another 15

Boeing
Co.

737-800 jets converted to carry cargo, in addition to five it is already leasing and 40 larger planes. Amazon said it expects to add another 10 rented planes by 2021. It has even sought to manage ocean freight.

Existing infrastructure for shipments

= 60 planes leased or owned

= 20,000 vehicles leased or owned

Existing infrastructure for shipments

= 60 planes leased or owned

= 20,000 vehicles leased or owned

Existing infrastructure for shipments

= 60 planes leased or owned

= 20,000 vehicles leased or owned

Existing infrastructure for shipments

= 60 planes leased or owned

= 20,000 vehicles leased or owned

While Amazon has become a force in the shipping industry, it still works with other delivery companies. “We believe UPS and Amazon work together to attain a mutually beneficial relationship,” a

United Parcel Service
Inc.

spokesman said. UPS and FedEx remain much bigger in terms of shipping volume and operations.

“FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space,” said a FedEx spokeswoman, adding that the company is teaming up “with major retailers to support their growth” through its network.

Write to Sebastian Herrera at Sebastian.Herrera@wsj.com

Share Your Thoughts

Which company do you consider most reliable at delivering packages? Join the conversation below.

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Free Gift With Our Newsletter

We hate SPAM and promise to keep your email address safe

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Top Stories!

To Top