As I’m sure that we all know by now, Amazon is a very large company that does a lot of different things: they ship books and products, offer cloud computing resources, and even run an internet based television channel. The product managers at Amazon are under an enormous amount of pressure to always be looking for ways for the company to keep on growing. This is why they have expanded in to such diverse areas as grocery stores. However, now the Amazon product managers are taking a closer look at how they run their business and they’ve decided that it’s time for some of the firms that they have been relying on to go away. Now Amazon is getting ready to update their product development definition in order to take on UPS and start its own delivery business.
What Amazon’s Delivery Business Would Look Like
Currently, when Amazon wants to ship a product to somebody who has purchased it, they will use either the U.S. postal service, UPS, or FedEx. That is all about to change. Amazon is currently planning on launching their own package delivery service that will allow it to compete directly with all three of these firms. The new service is going to be called “Shipping With Amazon (or SWA) and the service will consist of Amazon picking up packages from businesses and then shipping them directly to customers. If done correctly, this is going to end up looking good on someone’s product manager resume.
Amazon plans on starting this new service using the third party sellers that the company is currently working with. Over time, the service should grow to become larger and work with other businesses also. In terms of how much all of this is going to cost, Amazon plans on charging less than both UPS and FedEx. This new service is not going to be an easy one to build. Amazon is going to have to make the investment to build out a delivery infrastructure and then hire the people that will be needed run a reliable delivery service. What this means for UPS and FedEx is that it could end up taking years for Amazon to make a dent in the package delivery business.
As with all things that Amazon does, they have already tested this new service. Amazon first rolled it out as a test in Los Angles and in London. Amazon has been exploring the package delivery business for a number of years. They have been making moves to create their own delivery businesses for both freight and parcels. Over the past few years Amazon has started their own ocean freight business, created a network of local drivers who have the ability to delivery goods to inside of customer’s houses, and leased 40 aircraft while at the same time establishing their own air cargo hub. Currently Amazon delivers some of its own orders in 37 U.S. cities. With its new “Shipping With Amazon” service, the company plans on having its drivers visit warehouses and businesses to pick up packages and then deliver them when it is able. If the company can’t deliver the package, then they will rely as they do today on the U.S. postal service, UPS, and FedEx.
What Are The Chances Amazon’s Delivery Business Will Be Successful?
The reason that the Amazon product managers are exploring creating a new way to deliver packages to their customers is because they always want to be innovating and experimenting in order to find ways for their business customers to have faster, low-cost delivery choices. There are some serious questions as to if Amazon is going to be able to pull off creating of yet another package delivery service that can operate on a broad scale. The commercial companies that they will be competing with, UPS and FedEx, have spent decades building massive delivery networks that allow them to get to any customer in the U.S. Make no mistake about it, creating this kind of package delivery network is very expensive. UPS is planning on spending US$7B this year to upgrade its delivery network.
The people who study the package delivery industry are somewhat skeptical about Amazon’s ability to create and operate a package delivery business. The reasons that they think that Amazon may struggle doing this is because Amazon does not currently have either the capacity or the equipment to handle large-scale shipments. At the same time, right now it’s not clear that Amazon is going to be willing to invest enough to build up their package transport network to be able to handle the expected volume. So far the company has not yet made a real push to acquire the transportation assets that it will need to own that will be required in order for it to be competitive in this space.
The Amazon product managers need to understand that the firms that they are getting ready to compete with are massive. FedEx alone has 40 years of experience in delivering packages, they operate 650 aircraft, over 150,000 trucks, use over 400,000 employees, and are able to deal with 12 million shipments each and every day. Although Amazon is a big customer for FedEx, FedEx has said that no single customer of theirs constitutes more than 3% of their revenue or volume. The motivation for Amazon to create its own package delivery system was generated when it started to miss deliveries during the gift-giving season in December of 2013. What happened is that more and more people were buying things on line and the volume became too much for the existing parcel delivery services to keep up with. For now Amazon will continue to use the U.S. postal service, UPS, and FedEx to deliver the majority of their packages. However, tomorrow is another story.
What All Of This Means For You
What next for those product managers over at Amazon? The Amazon product managers have been expanding into a number of new areas. However, lately they have taken a look at how the company runs its core business, selling packages to customers, and based on their product manager job description they think they know how to do this better. Amazon is in the process of creating their own package deliver business which will compete with the U.S. postal service as well as UPS and FedEx.
The new service is going to be called “Shipping With Amazon (or SWA) and the service will consist of Amazon picking up packages from businesses and then shipping them directly to customers. If Amazon really wants to take on UPS and FedEx then they are going to have to be willing to make a significant investment in both equipment and people. This is not Amazon’s first venture into shipping packages. Over the past few years they have been making investments in ocean transportation, local delivery, and even planes. The people who study the package transportation business think that Amazon will struggle to compete. Both UPS and FedEx make massive investments in their business each and every year. So far Amazon has not shown a willingness to make the kinds of investments that it is going to take in order to be able to compete in this business. Amazon is motivated to create their own business because of a problem with getting package to customers that they experienced one Christmas. They will continue to use the U.S. postal service, UPS and FedEx – for now.
Amazon is so large and so successful that their product managers can probably accomplish anything that they want to do. Shipping packages successfully to their customers is a key part of their core business. It makes sense that Amazon would want to take control over this task since it can have such an impact on their bottom line. However, this is not an easy thing to do. Both UPS and FedEx have spent years and untold millions to create the highly efficient systems that they have in place today. Amazon very shortly is going to have to make a decision as to if they want to make the investment that will be required to go toe-to-toe with two of their major vendors. Time will tell if eventually one day we’ll be saying “Ship it using Amazon!”
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: In order to quickly get the infrastructure needed to ship packages, do you think that Amazon should buy another shipping company?
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