What's going on?
According to reports released on Thursday, Amazon is launching a pilot project to start shipping orders through its own in-house delivery service – challenging the delivery companies it uses like FedEx and UPS.
What does this mean?
Currently, Amazon uses external delivery services when shipping products from third-party sellers on its marketplace to end customers. Now, Amazon appears to be building up its own courier service that would pick up goods from sellers, and, in some cases, deliver them directly to customers.
The further expansion of Amazon’s own delivery services will likely put it in competition with its current delivery partners, whose services simply may not be needed by Amazon going forward… and that’s got shareholders in those companies a bit nervous!
Why should I care?
For markets: Many companies are at risk of being mowed over as Amazon’s empire grows.
One of Amazon’s biggest market-moving decisions in the past few months was when it chose to buy Whole Foods. Grocery stocks like Kroger and Costco tumbled as a result, and some still haven’t quite recovered (Amazon is a formidable competitor, after all). One open question is whether delivery companies’ stocks will follow in their footsteps…
The bigger picture: Delivery is an important part of retailers’ digital strategies.
From Amazon’s point of view, managing delivery in-house would be more efficient and improve the end experience for its customers, since it would be in control from the second a customer clicks “order” to the package’s arrival on their doorstep. Now Walmart (which is amping up its ecommerce game) is also diving deeper into the delivery world with its acquisition of Parcel, a startup that offers same-day delivery services in New York City (and which will thus help Walmart compete with Amazon’s Prime Now). It seems that big retailers see in-house delivery as one of the most important ways to win over today’s customers online.