For years, three firms — FedEx, UPS, and the United States Postal Service — have dominated the last-mile delivery industry in the United States. However, according to a new assessment, Amazon, through its shipping subsidiary Amazon Logistics, is no longer a minor danger to these businesses; it has begun sending more parcels than FedEx and is approaching UPS’s delivery levels.
To deliver items to its consumers, Amazon used to rely primarily on FedEx and UPS. However, following a catastrophic 2013 Christmas shopping season in which delivery systems failed to keep up with the flood of presents bought from Amazon by US customers, causing severe delays, the business changed its strategy. The next year, Amazon increased its distribution centre building and began gathering fleets of semi-trucks, cargo aircraft, and delivery vans. Since then, Amazon has slowly shifted more deliveries away from FedEx and UPS and toward its own logistics operation.
In terms of revenue, Amazon Logistics has yet to catch up to its US package delivery competitors. However, this might be due to the fact that it provides below-market pricing to its primary customer, Amazon. According to Quartz’s analysis of Pitney Bowes statistics, Amazon Logistics earns around $4.28 each box delivered, compared to $12.19 for UPS and $17.95 for FedEx.
It can afford to keep costs low while raking in profits because its marketplace business subsidises its delivery infrastructure. If Amazon increases delivery charges for non-Amazon customers, the e-commerce titan might become the market leader in yet another industry.