Amazon Going Head-to-Head with UPS & FedEx

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.

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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:

UPS:

  • 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

FedEx:

  • 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.

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A peek down the aisle in one of Amazon’s Manhattan warehouses. Despite the small space, Amazon still manages to cram in thousands of products.

Closing Thoughts

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.

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10 thoughts on “Amazon Going Head-to-Head with UPS & FedEx

  1. Awesome post, Clare! There is certainly a lot to consider as Amazon enters the shipping space. I agree with you that it is a lot to take on, but I think Amazon is up to the challenge. If they can dominate their entire supply chain, their sustainable competitive advantage will be nothing less than formidable. As self-driving trucks become a reality, I think Amazon will be able to take advantage of the industry shift and disrupt with cutting-edge technology. I am excited to see how this plays out in the near future!

    Liked by 2 people

  2. Great post, Clare! I am certainly skeptical based on the solid foundations that UPS and FedEx already have, but i agree with your key point: timing. If Amazon is trying to disrupt this space, it’s helpful that it’s already being disrupted by other developing technologies (self-driving vehicles, robotic delivery, etc). Netflix jumped into streaming right as personal computers were taking off, so perhaps Amazon is hitting this market right as these new technologies are adopted. I’m very curious to see if they can fully control their supply chain – and to see how this will affect prices.

    Liked by 1 person

  3. Loved this post Clare! I especially appreciate how it relates to our conversation in class about Amazon’s difficulty entering China due to the legal and financial environment. Conversely, it’s very impressive that Amazon is close to holding the #1 position in India’s e-commerce market! It is not unlike Amazon to totally disrupt an industry (@Walmart), so I completely believe they could undercut UPS and FedEx in pricing.

    Liked by 1 person

  4. Liked your post, Clare! (Especially the last Alexa pic :)) When I heard this news, I was shocked. To me, it seemed like a misuse of money and time to compete against such well-established delivery services like UPS and FedEx. I personally think Amazon’s resources would be better used working on other projects and developing technologies to improve their already successful services. However, I hope that Amazon proves me wrong. If they discover how to differentiate themselves in the industry by utilizing and developing disruptive technology, I am confident they will be successful. The question is if disruptive technologies and timing will intersect.

    Liked by 1 person

  5. I’ve actually wondered for a while how long it would take Amazon to take this step. I wonder if they’re really trying to disrupt UPS/ FedEx (the former who does an excellent job with logistics). My suspicion is that they’re mainly using this as a means of strengthening/ maintaining their negotiating position. They want to rely on UPS/ FED EX, they just don’t want to be dependent on them.

    Liked by 1 person

  6. Awesome post! The market’s response to Amazon’s announcement is amazing and shows how truly dominant and fearful everyone is of them. Stocks of both UPS and Fedex fell by more than 5% at one point after this announcement. It’ll be interesting to see Amazon’s margins for this service and the overall effect of SWA on Amazon’s bottom line moving forward.

    Liked by 2 people

  7. Great post! I’ve got to say I’m astonished how influential and powerful Amazon is all over the world, with the exception of China. Literally no one would think acquiring (or competing) with UPS and FedEx would be possible, yet Amazon does. I wonder how big Amazon is going to get in so many fields, and how its attempt to get up to UPS/FedEx’s level is going to affect UPS/FedEx!!

    Liked by 1 person

  8. Thanks for posting! I think Abby hit the nail on the head: to disrupt an industry with players this powerful, Amazon would need to rely on the emerging technology to get ahead. UPS/FedEx have established, successful operations, especially in terms of logistics, and it doesn’t seem feasible for Amazon to beat them yet. But with the help of their innovative technology, Amazon can be the leader in the future of delivery.

    Liked by 2 people

  9. Muy bien. Like my post about Amazon Health, I like how you never count Amazon out of a fight! Nevertheless, I think your point about the sheer investment needed is also important to consider. The same goes for healthcare.

    Liked by 1 person

  10. Clare, awesome post! Amazon has had quite the past 2 weeks. Not only have they announced SWA, but the company has also rolled out 2 hour grocery delivery (to a success so far) and announced their plans and ambition to become a hospital supplier. The new question we should ask ourselves is: how many industries did Amazon disrupt this week? I agree with Dylan and Abby, and I think that if Amazon really wants to compete with FedEx and UPS (which is far in the future), they are going to have to use technology to their advantage. Like the statistics show (which was an awesome part of your post), Amazon doesn’t nearly have the same capacity as these shipping firms. A possible solution is to use driverless trucks to save investment on workforce!

    Liked by 1 person

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