DISRUPT - Amazon Focuses on the Last Mile, FedEx and UPS

Amazon Flex, Amazon Logistics and Fulfillment By Amazon (FBA) Services May Disrupt Existing Delivery Services

Over the past few days, stories from several sources have speculated that Amazon intends to own the 'Last Mile' in ways that will disrupt FedEx and UPS, the two largest delivery services. Yesterday these stories gained enough momentum that share prices for FedEx and UPS fell. However, at the end of trading today share prices had recovered or gained strength.

InfoStream, noted Amazon's interest in controlling the 'last mile' in December when Amazon acquired Blink to supplement its Amazon Key service. The two services that show just how interested Amazon is in becoming a disruptor  are Amazon Flex and Amazon Logistics. 

Amazon Flex is aimed at recruiting delivery people in major centers who can use the Amazon technology and smartphone tools to create a flexible contractor business they own. It seems quite well thought out and the online commentary from those involved seems mostly positive. The model 'uberizes' Amazon delivery services to support Amazon Prime (two day service) and a developing new service called Amazon Prime Now (2 hour service) to support the Whole Foods acquisition. Amazon Flex also recruits contractors who have the equipment and licensing to deliver services for the 'middle mile' in the Amazon delivery chain.

Amazon Logistics is aimed at expanding logistical services throughout the delivery chain first for Amazon products, then Amazon Marketplace users and eventually other businesses who may wish to use the competitive Amazon Logistic and Delivery services that compete with Fedex or UPS. Amazon began developing the logistics services for its own products in 2016 and now is expanding the service to the Amazon Marketplace users.

All of this activity has created quite a stir. 

Retail Dive in an article entitled 'Taking the Amazon battle to last-mile delivery seriously' suggests the industry needs to take this Amazon move very seriously because of the implications for retailers and delivery services. 

Forbes published an article in November entitled 'Why FedEx and UPS Don't Need to Worry About Amazon' suggesting the scale of the anticipated Amazon moves would not be a threat to either of these existing services. 

Even if the scale doesn't threaten at this point, one wonders if this is not a good strategy for Amazon in the long run. For instance, it will improve the bargaining power for pricing the services is does use from these other logistical suppliers; It refactors the logistics model for the industry; It will also add competitive pressure that eventually can lower the acquisition metrics if Amazon should decide to buy out one of these services; and finally, It generates a number of benefits for the most important element of the market, the consumer.

Reviewing the Amazon Apps on Google Play is quite revealing.