Amazon Air recently quietly launched its 44th Amazon Air gateway – this time at Lihue Airport (PHLI) on the Hawaiian Island of Kauai, thus fixing yet another jigsaw piece on its world-domination map. And a CNBC report aired on 04SEP21 has the company muscling in on third-party logistics, too.
The latest Chaddick Report titled “Blue Skies for Amazon Air”, reveals that 70% of the U.S. population now lives within 100 miles/160 kilometers of an Amazon Air gateway. That translates into a catchment area numbering over 217 million people and is an increase of 13% points since SEP20. The rapid expansion has led to a network now comprising 400,000 drivers, 40,000 semitrucks, 30,000 vans, over 185 warehouses, a fleet of 73 own aircraft, and a brand-new air hub costing over 1.5 billion USD in Kentucky, which opened at the start of AUG21. Amazon meanwhile serves over 300 million customers in more than 200 countries across the globe.
In the CNBC interview, Bernie Thompson, Founder and CEO Plugable Technologies, and an Amazon seller, pronounced: “I don’t think anybody in the industry would be surprised if this enormous capacity that Amazon has built out, if they would use that to offer a shipping service that would compete directly with someone like UPS, Fedex…”
In fact, it is already doing this
While Amazon was reliant on UPS and Postal Services in the beginning, this dependence has thus far shrunk to just over a quarter of all its deliveries, as it is now capable of fulfilling 72% by itself (up from 46.6% in 2019). This move towards self-reliance was triggered back in 2011, already, when its service providers were struggling to handle Amazon’s volumes. Amazon therefore began in earnest in 2014 to establish its own, strong delivery network from scratch. And now, just 7 years later, the focus is already on not just performing its own deliveries, but also on offering shipping services for non-Amazon orders, something it has rolled out in the UK, and where it is thus a direct competitor to some of its own service providers. Slowly, but surely, Amazon is also beginning to shift US Postal cargo on board of its planes, too. “USPS isn’t exactly known right now for being on time or efficient,” Rachel Greer, ex-Amazon Product Safety Manager, laughs, “so it may be that Amazon is the better option in those cases.”
Logistics as a service
So, it would seem, Amazon is beating its service providers at their own game. “Logistics as a service” was launched in the UK in MAY20: “Amazon Shipping delivers orders from your own website and other e-commerce channels. We pick up your parcels seven days a week and deliver them to your customers the next day,” is the promise on its website, along with “competitive rates, no extra fees, delivery you can trust, no contractual obligation,” etc.
Experts predict that this service, which will be focused on retailer to consumer deliveries, will make its way across the pond to roll out in the U.S. by 2022, if not already before the end of this year. Dan Romanoff, Equity Research Analyst, Morningstar, is of the opinion that Amazon will be doing this on its own terms: “Amazon is cherry-picking the routes they want to run and the parcel sizes they will deliver.”
Aside from its rapidly expanding flight schedule, Amazon has also introduced an LTL service with its truck fleet, aggressively targeting sellers to gain traffic that is currently travelling on UPS or FedEx. And it opens its warehouses to products that are sold on other channels, too. Just like nature abhorring a vacuum, Amazon ensures that it fills all of its space in its warehouses, aircraft, and road feeder services – ups its cost-benefit numbers, and continuously increases its market-share and power.
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