Saurabh Ambulkar, a management professor at Northeastern University, said this points to Amazon’s broader goal of becoming a “one-stop shop” in the supply chain that covers everything from storage and shipping to last-mile delivery to the customers.
Doing so provides more control and visibility for Amazon, while giving better prices and convenience to the merchants that sell on its site, he said.
“Amazon wants to be this one central shop where you can do everything,” Ambulkar said.
Amazon has doubled down on expanding its logistics network in recent years. It has entered the ocean freight business, added its own fleet of trucks and leased dozens of aircraft to handle parts of its massive amount of shipments. It is also delivering more packages to the customers through independent contractors and new initiatives like Amazon Flex, which depends on hourly drivers.
Amazon’s shipping costs have continued to rise, jumping from $11.5 billion in 2015 to $21.7 billion in 2017.
RBC Capital’s Mark Mahaney said Thursday on CNBC’s “Power Lunch” that it’s just a “matter of time” before Amazon makes a big investment in the shipping space.
“There’s another investment cycle coming, and I bet you it’s around shipping and [Amazon] actually coming out and directly competing with FedEx and UPS,” Mahaney said.
UPS didn’t respond to a request for comment. FedEx played down Amazon’s threat as a competitor, saying its infrastructure and 40-plus years of experience are not easily replicated.
“While there has been significant media interest in what Amazon is doing to expand their in-source delivery capability, this should not be confused as competition with FedEx,” FedEx said in a statement.
Berman, the Amazon seller, said he doesn’t expect the rates to stay this low forever and says the service may not be fully reliable right away. But even a smaller discount and the promise of a 24-hour delivery window would be enough for him to become a dedicated future user if Amazon further expands the service.
“I do have a lot of trust in Amazon’s shipping system,” he said. “It wouldn’t take much for me to switch over and go all-in.”
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