November 8, 2018
It’s about more than just responding to USPS
Developing its own last-mile fulfillment service gives Amazon a couple of big opportunities.
First of all, it could enable Amazon to provide faster and more customized fulfillment. If it controls every step in the process of getting orders from its warehouses to customers’ doors, it can ensure packages are delivered faster and at times when customers are able to accept delivery. The latter may be increasingly valuable as competitors move toward faster shippingoptions for their customers in an effort to compete with Amazon Prime. The former may be able to reduce overall shipping costs, as Amazon can offset its reliance on UPS and FedEx for guaranteed two-day Prime shipping.
If Amazon continues to fill out a last-mile delivery network, it could eventually use its existing infrastructure and scale to offer the service to other businesses. Amazon took that approach with its cloud computing business, where it leveraged its own cloud infrastructure and expertise to offer a product to other enterprises. That’s now one of its most profitable businesses. It also did the same thing in its retail business as it built out its warehouse footprint and improved its technology to offer fulfillment services for other merchants. Now it could offer competitive last-mile delivery services.
Amazon is flexing its muscle with USPS. If the latter insists on raising rates, it could have serious consequences that ultimately lead not only to losing Amazon’s valuable business, but to creating an entirely new competitor for the part of its business that produces real profit.
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