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Amazon an e-commerce Integrator?

LONDON: A report from UK international courier company ParcelHero suggests Amazon.com is planning to revolutionize e-commerce with its own logistics operation.

By the end of 2014 Amazon had earned a cumulative net profit of just US$1.9 billion in its 20-years as a public company, despite more than $400 billion in sales during that period.

In 2012 it launched its own UK logistics services as a precursor to expanding in Europe and the U.S.

According to Scott Galloway, professor of Marketing at New York University's Stern School of Business, Amazon will eventually become the "pipe through which everything you buy flows".

amazon 3Report author and ParcelHero founder Roger Sumner-Rivers says he has identified some key reasons for Amazon's move into logistics:

  • Amazon claims its new logistics arm is simply to 'complement' existing delivery companies and support its key strategy of strengthening its Prime service to encourage customer loyalty. However, to support the scale of such a logistics operation, a number of industry experts believe it may well become a logistics provider in its own right, competing with established companies such as UPS and Yodel.
  • Amazon stands to save US$3 billion globally and £122 million in the UK alone this year by cutting down on the use of external delivery companies, and could look to its logistics arm becoming a net income source rather than a US$5.13 billion yearly expense.
  • Amazon Logistics' introduction means it is not beholden to traditional mailing services such as the Royal Mail, and can support its Prime service actively by boosting lucrative Sunday deliveries and Same-Day Delivery services.
  • Long term, business analysts believe everything, starting with weekly groceries and home services, could be delivered through a pipe called Amazon.
  • Looking further into the future, the company is even considering using its new logistics service to manufacture items, using 3D printers, while en route to customers – the patent has already been filed.
  • In March this year Amazon staged trials with Audi delivering items directly into customers' cars. This service could be rolled out across Germany if tests are successful.
  • Should the 'great Amazon Logistics experiment' ultimately prove successful it could kick- start a radical change in the entire supply chain industry, as global rivals such as Alibaba, and large-scale companies such as Tesco.com, consider whether to make their own fleet available for third party deliveries.

Sumner-Rivers thinks Amazon eventually will become a logistics company competing with the other Integrators and mail companies: "The reports shows why we believe long-term Amazon's logistics plans mean everything will one day be delivered through a portal called Amazon, from the web platform you order your items on, right through to the actual production of those items, while on the way to you."

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