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My initial reaction was to question their growing levels of vertical integration, but their volume is so huge that they will probably rival UPS/Fedex if you inc

by manav 10y ago

My initial reaction was to question their growing levels of vertical integration, but their volume is so huge that they will probably rival UPS/Fedex if you included all of Amazons shipments across carriers. It would cost Amazon 40-50b to buy Fedex, probably twice as much for UPS. If they really plan to run their own fleet they probably have a plan beyond just doing Prime deliveries.

Trundle 10y ago
I'd think Amazon would be able buy either for less than market value. They'd drop in value anyway if Amazon moved away from them and did their own thing.
jonknee 10y ago
The beauty of it for Amazon is they only need to compete in their best markets. Pure shipping companies have to go everywhere, but Amazon has the luxury of doing its own delivery only where it is easy and outsourcing it to legacy shippers where it's not. For example, I could easily see Amazon delivering directly to large condo/apartment buildings in urban areas.
- was_boring 10y ago
  Only USPS ships everywhere. If you go to UPS/FedEx/DHL, they will tell you they ship everywhere and take your package, but if they deem your package not profitable enough they will hand it over to USPS. The shipping market is incredibly complex with USPS and FedEx actually being each other's largest customers.
  - kuschku 10y ago
    DHL ships everywhere except for the US, where you're right, they do outsource shipping to the USPS. DHL used to have its own delivery network everywhere in the US, too, but they found it hard to compete.
    - was_boring 10y ago
      You're right. I should have prefaced my comment as talking only about shipping in the US.
  - generj 10y ago
    That is true, but it is also true that UPS and FedEx still operate a lot of non-profitable areas. They rely on easier metro areas to help subsidize the losses.
- claudius 10y ago
  This already started to happen a while ago (couple months?) in Munich. Amazon packages are delivered by a specific Amazon delivery person instead of DHL as before. Now I don’t need to sign anything any more when at home and when I’m not at home, it will be left in front of my apartment door; whereas DHL either handed it over to a neighbour or a ‘closeby’ post office. Not sure what I would do if a shipping went missing while in front of my apartment door, but from past interactions with Amazon, I’d assume they send a new one without asking questions.
  - MrBuddyCasino 10y ago
    Ha! So it wasn't just in my mind. This is great news, the Packstation is often full nowadays.
adventured 10y ago
> but their volume is so huge that they will probably rival UPS/Fedex if you included all of Amazons shipments across carriers Not even remotely close. Amazon's total retail shipping volume represents about 5%-6% of UPS by itself. Amazon's total shipping costs annually are equal to about 9% of the revenue UPS does currently. You're dramatically underestimating how big UPS + Fedex + USPS are. Those three deal with shipping for businesses and consumers representing $40+ trillion in global economic activity, and of course have a huge share of the US $18 trillion economy. Amazon is still just a large drop in that vast shipping ocean.
- maverick_iceman 10y ago
  This is clearly wrong. World GDP currently is ~$77 trillion. You seriously think more than half of that goes to shipping?
  - TorKlingberg 10y ago
    Adventured said their _customers_ represent $40+ trillion. Which is a rather meaningless figure, but not clearly wrong. I general, a lot of shipping revenue comes from business-to-business, which is not threatened by Amazon.
  - UlyssesSKrunk 10y ago
    No, don't be ridiculous, it doesn't just go to shipping, it all goes to just these 3 entities. All other shipping companies are about $25 trillion. It's truly surprising how little of all money spent actually goes towards stuff. Check your next credit card bill. I'd be willing to bet that over 80% of all you spending in a given month is shipping. There have been fascinating studies done on the psychology of it. It's become such a large part of our cultures that most people forget they even do it. There was a documentary that followed 17 people through their daily lives in a major US city for 6 whole months. Most people didn't even remember shipping something most days, yet on average each person when into either a Fedex, Ups, or USPS store 37 times per day to ship things. Absolutely amazing.
    - 10y ago
InclinedPlane 10y ago
There is zero reason for them to buy UPS or Fedex, zero. Let me tell you a secret, Amazon's relationships with shipping companies are so good that they can get incredible deals on rates. That may seem obvious, but it's true and it's important. Because it means that there isn't a huge amount of savings to be had by buying up a shipping company. The advantage to Amazon would be acquiring the business of the shipping company, but those companies operate on thin margins and have to deal with a lot of hassles that our outside of Amazon's business scope right now, so overall it doesn't seem like a good idea. In terms of vertical integration, it makes far more sense for Amazon to simply build whatever it needs itself if it really wants to, it's already done some of that with Amazon Fresh so they are keenly aware of the issues in that part of the business and have a good idea of when it would make sense to get into it or not (currently, for last mile delivery, the answer is "sometimes but usually not").

by manav 10y ago

Trundle 10y ago

I'd think Amazon would be able buy either for less than market value. They'd drop in value anyway if Amazon moved away from them and did their own thing.

jonknee 10y ago

The beauty of it for Amazon is they only need to compete in their best markets. Pure shipping companies have to go everywhere, but Amazon has the luxury of doing its own delivery only where it is easy and outsourcing it to legacy shippers where it's not. For example, I could easily see Amazon delivering directly to large condo/apartment buildings in urban areas.

was_boring 10y ago
Only USPS ships everywhere. If you go to UPS/FedEx/DHL, they will tell you they ship everywhere and take your package, but if they deem your package not profitable enough they will hand it over to USPS. The shipping market is incredibly complex with USPS and FedEx actually being each other's largest customers.
- kuschku 10y ago
  DHL ships everywhere except for the US, where you're right, they do outsource shipping to the USPS. DHL used to have its own delivery network everywhere in the US, too, but they found it hard to compete.
  - was_boring 10y ago
    You're right. I should have prefaced my comment as talking only about shipping in the US.
- generj 10y ago
  That is true, but it is also true that UPS and FedEx still operate a lot of non-profitable areas. They rely on easier metro areas to help subsidize the losses.
claudius 10y ago
This already started to happen a while ago (couple months?) in Munich. Amazon packages are delivered by a specific Amazon delivery person instead of DHL as before. Now I don’t need to sign anything any more when at home and when I’m not at home, it will be left in front of my apartment door; whereas DHL either handed it over to a neighbour or a ‘closeby’ post office. Not sure what I would do if a shipping went missing while in front of my apartment door, but from past interactions with Amazon, I’d assume they send a new one without asking questions.
- MrBuddyCasino 10y ago
  Ha! So it wasn't just in my mind. This is great news, the Packstation is often full nowadays.

adventured 10y ago

> but their volume is so huge that they will probably rival UPS/Fedex if you included all of Amazons shipments across carriers Not even remotely close. Amazon's total retail shipping volume represents about 5%-6% of UPS by itself. Amazon's total shipping costs annually are equal to about 9% of the revenue UPS does currently. You're dramatically underestimating how big UPS + Fedex + USPS are. Those three deal with shipping for businesses and consumers representing $40+ trillion in global economic activity, and of course have a huge share of the US $18 trillion economy. Amazon is still just a large drop in that vast shipping ocean.

maverick_iceman 10y ago
This is clearly wrong. World GDP currently is ~$77 trillion. You seriously think more than half of that goes to shipping?
- TorKlingberg 10y ago
  Adventured said their _customers_ represent $40+ trillion. Which is a rather meaningless figure, but not clearly wrong. I general, a lot of shipping revenue comes from business-to-business, which is not threatened by Amazon.
- UlyssesSKrunk 10y ago
  No, don't be ridiculous, it doesn't just go to shipping, it all goes to just these 3 entities. All other shipping companies are about $25 trillion. It's truly surprising how little of all money spent actually goes towards stuff. Check your next credit card bill. I'd be willing to bet that over 80% of all you spending in a given month is shipping. There have been fascinating studies done on the psychology of it. It's become such a large part of our cultures that most people forget they even do it. There was a documentary that followed 17 people through their daily lives in a major US city for 6 whole months. Most people didn't even remember shipping something most days, yet on average each person when into either a Fedex, Ups, or USPS store 37 times per day to ship things. Absolutely amazing.
  - 10y ago

InclinedPlane 10y ago

There is zero reason for them to buy UPS or Fedex, zero. Let me tell you a secret, Amazon's relationships with shipping companies are so good that they can get incredible deals on rates. That may seem obvious, but it's true and it's important. Because it means that there isn't a huge amount of savings to be had by buying up a shipping company. The advantage to Amazon would be acquiring the business of the shipping company, but those companies operate on thin margins and have to deal with a lot of hassles that our outside of Amazon's business scope right now, so overall it doesn't seem like a good idea. In terms of vertical integration, it makes far more sense for Amazon to simply build whatever it needs itself if it really wants to, it's already done some of that with Amazon Fresh so they are keenly aware of the issues in that part of the business and have a good idea of when it would make sense to get into it or not (currently, for last mile delivery, the answer is "sometimes but usually not").