Amazon is ready to take over the world.
In Amazon’s annual filing at the beginning of the year, they listed “transportation and logistics services” companies in their competitors for the first time. This means that Amazon is expected to expand their delivery services and logistics systems even more. In fact, they feel so confident in their services that they are ready to become competitors with UPS and FedEx (who have been partners with Amazon since the company expanded into the e-commerce market).
What is arguably more impressive than the bold move of moving into a new industry is how effective they have been in their execution. Amazon has been working for years on logistics initiatives that are impressive and original. The question becomes: With Amazon’s extensive vertical integration in their supply chain, at what point are they going too far? Amazon already owns the majority share in the U.S. in e-commerce and public cloud service markets. Now, they’re knocking on the door of using their resources to dominate the logistics market as well.
The first factor that makes Amazon’s logistics moves so incredible is the originality of the innovations that are being pushed to implementation. Amazon has been rolling out new and fresh ways of doing business that third-party companies have never even dreamed of doing in practice. Whether its locker service for customers who need flexibility and security, running their own ocean freight, or flying packages through the air straight to the customers’ doors, Amazon is doing all of it better than the third parties who have set them up for success.
The heart of Amazon’s new logistics systems is what they refer to as Project Dragonboat. This refers to Amazon’s goal to completely control the logistics cycle from producer to customer. Their ability to start shipping from companies to their Fulfillment Centers via cargo planes, ocean freight, and a growing fleet of trucks is just one half of their vertical integration. In addition to their ability to ship directly from China manufacturers to fulfillment centers in the U.S., Amazon has also introduced multiple ways of delivering directly to consumers. Two of their most impressive and original ideas include Amazon Flex and Locker Pickup. Amazon Flex is one of the smartest moves Amazon has made because it has allowed them to create flexible jobs for workers who are willing to take lower wages. It allows customers to have flexible shipping hours and expands their two-day and next-day delivery opportunities. Locker pickups solve a problem for customers in apartment buildings that hasn’t been addressed yet.
What may be the biggest and baddest logistics asset to Amazon is their freshly acquired patent for their Airborne Fulfillment Center (AFC). The AFC is essentially a giant warehouse that floats in the sky like a blimp and delivers packages directly to a customer’s location using unmanned aerial vehicles (UAV). This creates so much opportunity for Amazon to advertise, deliver what could potentially be the quickest service available, and take full advantage of heavily populated events. Although the AFC is not implemented in Amazon’s services yet, it provides amazing promise to how they can deliver high volume products even quicker to their customers.
A lot of stress has been put on Amazon’s rapid growth by Donald Trump, the most wide-reaching voice in America at the moment. Trump has been attacking Amazon since before the election on taxation, earnings, and their relationship with the USPS. Amazon reportedly paid nothing in federal taxes on more than $11 billion in profits. Trump claims that for each package the USPS delivers for Amazon, they lose $1.50, making Amazon richer and the Postal Service poorer. Is what Amazon doing wrong? If they are using U.S. government programs and rules to pay less in taxes, why is Trump so angry? Republicans have set up systems for U.S. companies to financially benefit for years, and now it seems like they are suffering the consequences.
An important thing to remember when viewing political comments on Amazon’s plans is that the e-commerce market is always growing and market share at one specific moment is probably insignificant. A company becomes threatening when their market share in multiple industries becomes overwhelming. Amazon is threatening to have major market shares in multiple industries, which will be difficult for companies to overcome.
Which company will outperform a company that has been thinking five steps ahead since the beginning of the century? The challenge is on for companies to come up with the next big initiative in e-commerce and logistics.
Michael Albanese, a Cranston resident, is a senior and marketing major at the University of Rhode Island.