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Amazon doesn't need to compete directly with UPS and Fedex to win. Instead, I'd argue that they need to take over deliveries to easy deliveries (eg, cities) an
by sanj 10y ago
Amazon doesn't need to compete directly with UPS and Fedex to win. Instead, I'd argue that they need to take over deliveries to easy deliveries (eg, cities) and continue to outsource the harder deliveries.
I'd suggest that this would remove the profit-producing deliveries for UPS/FedEx and leave them with those that they do at a loss.
It also explains the code name: "Consume the City"
- martincmartin 10y agoThe expected response from UPS and Fedex is "if you don't use us for the cities, we'll refuse to take your harder deliveries. You need to be all or nothing." Or the equivalent: "we see the writing on the wall, so we're going to charge you an arm and a leg for each harder delivery, to make the most money before you handle those deliveries on your own too."
- swalsh 10y agoall or nothing, or.... you know, just raise the price.
- bduerst 10y agoPretty much. This move decreases Amazon's buying power with them so they can just raise rates accordingly.
- sangnoir 10y agoConsidering that FedEx & UPS handover their "hard deliveries" to the USPS, I don't think Amazon is too worried. The USPS already handles Sunday deliveries for Amazon, they will probably expand that program if FedEx or UPS start getting too greedy.
- snowwrestler 10y agoI wonder if they can make that response. I know Fedex has argued at least once in court that they are a common carrier, and to my understanding, common carriers have some limits on how they can discriminate price or service based on who the customer is.
- elsewhen 10y agoI'm sure that if Amazon only left the low or negative margin deliveries with their partners, their partners would be forced to renegotiate those deals worth Amazon.
- jaynos 10y ago>Amazon doesn't need to compete directly with UPS and Fedex to win. Taking some of the deliveries allows Amazon to threaten to take more (or all) of them and pressures UPS and FedEx into keeping down the rates they charge Amazon.
- bitJericho 10y agoIt could just cause them to not accept any amazon packages.
- BinaryIdiot 10y agoConsidering Amazon makes up over a $1 billion of UPS's revenue you think they may just stop accepting Amazon's business even if Amazon starts cutting how much they use them? There's no way. They will keep their business until the bitter end because if they don't their competitors will and Amazon can generate a lot of volume for them.
- sgnelson 10y agoIf it leads to losses, then yes, UPS would drop Amazon in a heartbeat.
- BinaryIdiot 10y agoWhy would they start operating the Amazon account at a loss? They would likely lower the volume discount if the volume drops but I don't understand your point.
- pwthornton 10y agoThis is something that a lot of people don't understand about shipping and especially the U.S. mail. Deliveries to dense areas are fast and easy and near shipping routes and warehouses. They subsidize everyone else. For the USPS, they have to provide a bunch of flat rate services to everyone in the country. Amazon doesn't. All of their shipping innovations are going to be aimed at making it cheaper and easier for people in denser areas to get deliveries. I don't have an issue with this, because if people live far from civilization, they don't get to demand all of the latest parts of it, but it is something to keep in mind with all of this. And if Amazon can peel off the cheapest customers from UPS and FedEx, that's going to raise the rates for all of the remaining UPS and FedEx customers.
- kspaans 10y agoYup, and the same thing happened in London, UK. Simplified history: The Royal Mail (USPS equivalent) used to have a monopoly on mail and small parcels. They charged a flat fee to mail/ship to anywhere in the country. Then other couriers were allowed to start operating in locations of their choise without having to serve the whole country. They could cherry-pick the profitable locales (.e.g Metro London), undercutting Royal Mail's prices. I remember seeing an analysis of price and delivery quality: Royal Mail: 100% price, 85% happy delivery Other Courier: 66% price, 66% happy delivery Without going down the rabit hole of the wages these different workers were earning, as a consumer had a choice: subsidize cheaper shipping to the whole country, or get cheaper shipping.
- huac 10y agoWouldn't that just raise the cost for UPS/Fedex to deliver to rural or suburban areas?