Rick Watson, founder and chief executive officer of RMW Commerce Consulting, relates what Amazon.com is doing to position itself as a competitive threat to United Parcel Service for package delivery.
Over the past five years, Amazon has gone from handling the delivery of around 30% of its own parcels to between 60% and 70% now, Watson says. That has placed it directly in the path of UPS. “It’s inevitable that these companies will compete head to head, including in the North America market.”
The capital investments that Amazon has been making are “eye-popping and staggering,” Watson says. In the past year alone, Amazon has sunk around $40 billion into its business worldwide. UPS, by comparison, has spent about $4 billion. And over half of Amazon’s expenditures have been earmarked for logistics. UPS, meanwhile, has been making investments in research and development, with projects that can be easily capitalized for investors. Such initiatives are less geared toward improving the customer experience than Amazon’s efforts, Watson suggests.
Amazon’s expenditures include a robotics institute, hundreds of automated warehouse centers, an “extremely robust” middle-mile network connecting those warehouses, and the hiring of more than 100,000 franchise drivers for last-mile delivery. In addition, Amazon has launched its own third-party shipping service in the United Kingdom, similar to a venture that it piloted two years before the coming of COVID-19.
The pandemic “changed everything” for retailers, e-tailers and delivery services alike, putting a temporary damper on pilot projects. Nevertheless, says Watson, Amazon is continuing to grow in power and influence, to the point where it could garner the attention of regulators worried about the formation of a monopoly in the supply chain and logistics space. The question, says Watson, is whether Amazon’s recent actions have the potential to benefit or harm consumers.
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