Amazon.com, Inc. (NASDAQ:AMZN) has made it clear in recent years that it is not content to simply remain the world’s largest online retailer. In the last year, it has moved into original content production, its own set-top box for video streaming and soon will be unveiling its first smartphone. What might shock many is that Amazon may wish to move into logistics and delivery in certain markets.
Amazon: “The last mile”
The plan has been in the works for a few years now beginning with Amazon Fresh, a service that offers same day delivery of produce and other foods. Presently in San Francisco, the company is taking it a step further with something that they are calling “the last mile.” Trucks loaded with Amazon products are being driven in and out of a parking lots by Amazon.com, Inc. (NASDAQ:AMZN) contractors on both on the man-made strip of land called “Treasure Island,” and in the area surrounding the now-closed Candlestick Park.
Amazon is looking to control their delivery costs, which have been rising each year since 2009, and to take more control of their customers’ shopping experience. Ultimately, Amazon is chasing the ultimate in online shopping, same-day delivery.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Whether customers are noticing the shift isn’t yet evident, but the United States Postal Service, United Parcel Service, Inc. (NYSE:UPS), and FedEx Corporation (NYSE:FDX) are certainly aware of the company’s endeavors. Presently, Amazon is concentrating on San Francisco, Los Angeles, and New York. While still years away, the program could someday see Amazon.com, Inc. (NASDAQ:AMZN) actually delivering not only their own products but those of other companies and become a new delivery service in its own right.
Nothing (that) new
While millions of Amazon customers are certainly still unaware of this, a listen to regular earnings calls, shareholder letters, or a glance at job postings on its website would leave you less surprised.
“Amazon is growing at a faster speed than UPS and FedEx, who are responsible for shipping the majority of our packages,” a job posting recently read. “At this rate Amazon cannot continue to rely solely on the solutions provided through traditional logistics providers. To do so will limit our growth, increase costs and impede innovation in delivery capabilities.”
“Last Mile is the solution to this. It is a program which is going to revolutionize how shipments are delivered to millions of customers.”
The test run in San Francisco actually follows something that the company is already working on in the UK. “We’ve created our own fast, last-mile delivery networks in the U.K., where commercial carriers couldn’t support our peak volumes,” Mr. Bezos said in his annual letter to shareholders earlier this month. “There is more invention to come.”
Just last November, Dave Clark, Amazon.com, Inc. (NASDAQ:AMZN)’s vice president for world-wide operations, announced that the company would begin making its own Sunday deliveries in London.
Amazon was held hostage last year by United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX)’s inability to deliver Amazon’s shipments in time for Christmas. It blamed the carriers but was forced to offer customers $20 credits out of its own pocket.
“What happened during Christmas cost a huge amount of money” for Amazon.com, Inc. (NASDAQ:AMZN), United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX), said Marc Wulfraat, president of logistics consulting firm MWPVL International, which tracks Amazon closely but isn’t working with the retailer.
In its infancy “the last mile” has experienced a number of hiccups and growing pains are certainly expected for some time. However, in the long-haul it’s what is best for Amazon no matter who else suffers from a loss of business.