Amazon is now shipping packages for outside customers in its latest move to compete directly with FedEx and UPS. It’s been on a spending spree to increase capacity of its in-house logistics network, which is up 50% from a year earlier. According to SJ Consulting Group, Amazon is now shipping 72% of its own packages, up from 46.6% in 2019.
Meanwhile, Amazon has learned a lot about how to keep costs down from the shippers who handle the remaining 28% of its deliveries. For example, Amazon still primarily outsources costly rural deliveries to the U.S, Postal Service, and outsources the expensive last-mile portion to delivery service partner contractors.
“What Amazon is able to do right now is sort of pick off probably the most attractive routes, the most attractive packages, and deliver to the most densely populated areas,” said Dan Romanoff, who researches Amazon for Morningstar.
Some think there’s a chance Amazon will try to buy other shippers outright.
“Down the road I think Amazon will be so big, so powerful, so wealthy, they will simply absorb UPS,” said e-commerce consultant Chris McCabe, who was a seller performance investigator at Amazon from 2006 to 2012.