These trucks would be used to augment its grocery service, Amazon Fresh, which already provides same-day deliveries of local groceries to larger markets. Presently, Amazon Fresh is only available in Seattle, San Francisco and Los Angeles but Amazon has stated that they hope to add 40 markets by the end of 2014.
Divide and conquer
Tompkins recently told trade publication DC Velocity that Amazon.com, Inc. (NASDAQ:AMZN) has broken the United States into three segments: the top 40 markets which constitute half the population of the states, the next 60 markets by population, and the rest. It’s believed that Amazon.com, Inc. (NASDAQ:AMZN) is looking to service the first group itself and completely cut out FedEx, UPS, and the USPS though those carriers would continue to service the other segments. Amazon will use its 55 “fulfillment centers” in conjunction with the delivery fleet to service its Amazon Prime subscribers who are guaranteed two day delivery. Amazon has seen its shipping costs skyrocket as more and more people sign up for Prime.
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Earlier this week, Amazon.com, Inc. (NASDAQ:AMZN) raised the cost of its Prime Subscription from $79 to $99 for an annual membership. This move is presumably two-fold, the first being the increased of $1.1 billion in shipping costs between 2011 and 2012. This increase in Prime subscriptions could also be used to fund this fleet that Tompkins says Amazon is “very aggressively,” though he doesn’t have specific details with regards to a timeline.
Unlike the one day delivery that Amazon Fresh offers, the new fleet will extend beyond groceries. Tompkins has remained coy regarding the specifics of his relationship with Amazon.com, Inc. (NASDAQ:AMZN) so it’s anyone’s guess as to whether or not his statements are accurate. Numerous news outlets have reached out to Amazon regarding the report but the company, to date, has declined to comment on Tompkins remarks to DC Velocity.
Based on projected annualized growth rates of 15 percent, e-commerce could be a $1 trillion worldwide business by 2016, according to Morgan Stanley and it appears that Amazon will take a large chunk of this business and service it with its own fleet of trucks having decided not to make a bid for FedEx.