Retailer's planned shipping service needs deeper infrastructure to be a leading player
Amazon.com Inc. may have ambitions to compete against FedEx Corp. and United Parcel Service Inc. with its own shipping business. But the online retail giant is a long way from reaching the scale of America's freight titans. On Friday, The Wall Street Journal reported that Amazon is preparing to launch a delivery service for businesses.
Dubbed “Shipping with Amazon,” the service is expected to start in Los Angeles, serving the independent merchants that sell on its site. It is envisioned to expand to additional cities and outside businesses, too.
Still, Amazon's ability to one day haul and deliver packages for other retailers and consumers at a national scale would require tens of billions of dollars in investment, analysts say. It would also need thousands of trucks, hundreds of planes and to build thousands of sorting centers.
Amazon has only leased up to 40 planes and has roughly 300 warehouses in the U.S., including fulfillment centers, sortation centers and delivery stations, according to supplychain consultancy MWPVL International Inc. The company today mostly contracts and leases with delivery couriers rather than owning its own assets, a limiting factor, say analysts.
Amazon is “far away from having enough capacity to handle all of its own shipping,” much less having excess capacity to sell to shippers outside its third-party merchants “and truly start competing” with UPS and FedEx, Wolfe Research analyst Scott Group wrote in a Friday note.
The shipping giants have a sizable head start over Amazon. UPS has shuttled packages for more than a century since just before the introduction of Ford's Model T. FedEx began more than 40 years ago.
FedEx has roughly 650 aircraft, 150,000 trucks, 400,000 employees and 4,800 operating facilities globally to handle about 12 million shipments a day. UPS's larger operation handles more than 20 million packages a day with service to more than 220 countries and territories globally. Its fleet includes more than 500 owned and leased aircraft and more than 100,000 package cars and other vehicles to deliver packages.
Amazon generated an estimated 1.2 billion shipments last year domestically, according to MWPVL International. But most of those were delivered via the U.S. Postal Service, UPS and FedEx.
“The industry is just so big, I would be shocked if FedEx or UPS are scared right now just because Amazon is going to create an option,” said Paul Thompson, chairman of Transportation Insight, a Hickory, N.C.-based logistics company.
—Paul Page contributed to this article.
By Laura Stevens, Jennifer Smith and Paul Ziobro