Move Over, FedEx - Here Comes Amazon

PrintEmail

By Quinten Plummer
Dec 26, 2015 7:00 AM PT

New shipping policy is a bad deal for businesses.
As of January 2015 both FedEx and UPS began applying Dimensional Weight Pricing to all domestic Ground shipments. To learn more, download the whitepaper "How Dimensional Rate Pricing will Impact Businesses."

Amazon has been negotiating a lease for 20 Boeing 767 jets as it executes on plans to start its own air cargo business, according to recent reports.

It launched a pilot of the service in Wilmington, Ohio, where Air Transport Services Group, or ATSG, has been managing airfreight on Amazon's behalf, according to The Seattle Times.
The activity in Wilmington caught the attention of Vice's Motherboard, which learned that ATSG had moved into the Wilmington Air Park under contract with an unnamed company, it reported last month. That company was shipping freight to Allentown, Pennsylvania; Ontario and Oakland, California; and Tampa, Florida.

Flying Solo

Amazon likely will launch a more robust operation before January comes to a close, The Seattle Times reported.
The company eventually would acquire its own jets. For now, leasing is cheaper than buying, and it has yet to receive an air operator's certificate, according to reports.
Amazon's air ambitions may have been inspired at least in part by the events of two years ago, when packages arrived late during the holidays because UPS was overwhelmed.
If Amazon is moving to handle some of its shipping services in-house, the impact on FedEx and others will depend on the nature of its plans, according to Charles King, principal analyst for Pund-IT.
"If the company is trying to develop services that the established players don't offer or to somehow supplement existing UPS, FedEx and the USPS offerings, I think the effects will be fairly benign," he told the E-Commerce Times.
However, if Amazon is coming for the throats of the shipping industry's heavyweights, "it could be in for the fight of its life," King said.
"Leasing jets is one thing, but developing the ground-side infrastructure and personnel necessary for safe, reliable delivery is something else," he noted. "Plus, I don't expect established delivery services will make it easy for Amazon -- they'd be foolish to do so."
FedEx and UPS may be up for a fight, but it eventually might embalm and bury the struggling U.S. Postal Service, according to MastaMinds CEO Justin Hamel.
"UPS and FedEx are not only going to take a hit on revenue from this change, but Amazon will most likely reinvent shipping as we know it today, which is a very flawed and dated system," he told the E-Commerce Times. "It will be a win for consumers and a huge L for the shipping companies."

E-Commerce Dogfight

The shipping industry's players aren't the only group that should take note of Amazon's moves. E-commerce rivals may need to begin working out ways to counter the company.
"I wouldn't be surprised at all if Amazon starts delivering seven days a week in all locations with this move, offering one-day delivery to these locations as well," said Hamel. "This move will put e-commerce competitors in a camel clutch. A lot of companies will be playing catch-up and trying to jump on the Amazon logistics ship."
In the short term, Amazon's rivals may not be deeply affected. They've already countered its shorter fulfillment times with in-store pickup and delivery via ride-sharing companies, stated King.
"If Amazon's plans become a significant threat to UPS and FedEx, we could even see those companies playing nicer with lower-volume retailers in order to pressure Amazon," he said.
Amazon declined to comment on any plans for air cargo operations. "We have a longstanding practice of not commenting on rumors and speculation," it said in a statement spokesperson Kelly Cheeseman provided to the E-Commerce Times.