Amazon’s International Pursuit
From the UK to India, China, and now Singapore, Amazon has expanded to more than a dozen countries including Canada, Mexico, Brazil, UK, Germany, France, Russia, China, India, Singapore, Australia.
International sales have increased ninefold in the past decade (2006-2016), and now make up one-third (31%) of its total sales. Although its expansion hasn’t been the easiest, India is one of their success stories. With a population of 1.3 billion, India definitely possesses huge potential to make Amazon work. Let’s say you need baby diapers. Amazon sells a pack of Huggies diapers for ~60 Rupees cheaper than its Indian rival FlipKart, and promises 1-day delivery instead of FlipKart’s 3 to 4-day delivery. Amazon is close to holding the #1 position in India’s e-commerce market.
In China, however, Amazon has not met the same success. After acquiring the local website joyo.com decades ago and breaking into China’s market, Amazon was quick to realize that the competition would not be easy, as Chinese rivals like Alibaba already offer everything you can think of, and with free and fast delivery. For example, imagine that you need a lightbulb. Alibaba already offers a range of choices for as little as 3 Chinese yuan. Meanwhile, Amazon presents you with fewer options, and most of them at double the price. Statistically speaking, Alibaba holds approximately 40% of the market share in China, and Amazon ~1%.
Nevertheless, Amazon continues to make aggressive overseas investments, while maintaining its dominance in the US with innovative technological developments such as the robot employees in their warehouses and grocery store item sensor techniques. Developments are forcing competitors to adapt. Furthermore, Amazon is investing in everything from its video content, to cloud services business, to Echo, challenging tech giants Google and Apple.
Bigger, Bolder Moves
Amazon’s newest ambition is to launch a delivery service for businesses, essentially positioning it to compete head to head with UPS and FedEx. Needless to say, it’s a bold move. Will they be able to do it?
Called “Shipping with Amazon” or SWA, the service is going to transform Amazon’s title as an online retail giant. SWA will pick up packages from businesses and ship them to consumers. When I first learned of this news, I was naive to believe that it wouldn’t be so difficult a feat to accomplish because of how efficient Amazon already is at shipping packages from online orders. What I didn’t consider immediately was how difficult it will be for Amazon to muster up the infrastructure and personnel to ensure a reliable delivery network that can be scaled in the future. With its number one competitors being UPS and FedEx, who have already established themselves as hugely successful as delivery services, it may take Amazon years to even make a dent in the industry.
Amazon expects to roll out the delivery service in the next few weeks in Los Angeles, with ambitious hopes of expanding to other cities as soon as this year. The service will be piloted with the company’s third-party merchants that sell goods via its website; however, Amazon eventually wants to accommodate other businesses as well. One of its key strategies, people believe, is undercutting UPS and FedEx in pricing, although details are still unclear.
What would it take for Amazon to become UPS or FedEx?
In the last couple years, Amazon has expanded into ocean freight, created an in-home delivery network where a connected door-lock and security camera system allowed package carriers to enter customers’ homes via an app, and developed an air cargo hub. However, Amazon is far away from having the capacity to match FedEx or UPS in resources. Take a look at these stats if you aren’t convinced:
- 100,000+ package cars and other vehicles to deliver packages.
- 500 owned and leased aircraft
- Handles more than 20 million packages a day
- Services over 220 countries and territories globally
- 650 aircraft
- 150,000 trucks
- 400,000 employees
- 4,800 global operating facilities
- Handles 12 million shipments per day
Meanwhile, Amazon has leased 40 planes and 300 warehouses in the U.S. It shipped 1.2 billion last year domestically, but most of those were delivered via the U.S. Postal Service, UPS, and FedEx.
Amazon seems to be taking on bigger and more impressive feats every time I check in with what they’re doing. Normally, I would believe that taking on giants like UPS of FedEx is unrealistic––Amazon would be trying to disrupt an entire industry. However, that really is the spirit of innovation in this day and age. If Amazon didn’t try to break into the industry sooner, I’m sure another company would do just the same at a later time. Just think of how Netflix came out of nowhere and ousted Blockbuster from the movies and entertainment industry.
In class, we’ve discussed the importance of timing in the tech world. Getting the timing right could be the make or break. Amazon may be innovating relentlessly and investing huge amounts into its new pursuits, however the sheer global scale of UPS and FedEx might be too much to match at the moment. We may see Amazon relying on UPS, FedEx, and the U.S. Postal Service for many years to come.