By reintroducing its shipping service, Amazon aims to gain a more comprehensive grip on the entire consumer journey, allowing for greater influence over the delivery timeframe. This strategic move also reduces the reliance on third-party carriers like FedEx and UPS. This integrated approach could bolster the competitive stance of programs such as Amazon Flex among freelancers and gig economy workers.
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GLOThe contest for loyalty, both among merchants and consumers, could potentially be decided on the home straight.
The recent announcement that Amazon is reinstating its shipping service to handle deliveries intensifies the competition between the eCommerce giant, conventional carriers like UPS and FedEx, and even certain online platforms expanding further into the delivery sphere.
It’s noteworthy that this service will encompass packages sold on Amazon’s platform as well as externally, and reportedly includes items that are not stored within Amazon’s warehouses.
Amazon has been consistently broadening its seller ecosystem and unveiled the “Buy with Prime” feature earlier this year, enabling merchants to directly sell their listed products from their own websites. According to Amazon, merchants using Buy with Prime can boost their shopper conversion rates by 25%.
The involvement of third-party sellers has substantially contributed to Amazon’s auxiliary revenue streams. As indicated in the company’s 10-Q filing, third-party seller services (encompassing logistics and fulfillment) stand as the largest contributor to its top-line revenue after net sales from its online stores. This segment witnessed an 18% year-on-year growth to $32.3 billion in the most recent period, significantly outpacing the 4% growth in its online stores’ revenue (approximately $53 billion).
This Shipping announcement follows closely after news that Amazon is set to double its number of same-day delivery centers.
Doug Herrington, CEO of Worldwide Amazon Stores, said late last month that the doubling will take place over multiple years, noting that “across the top 60 largest U.S. metro areas, more than half of Prime member orders arrived the same or next day.”
Monopolising the Delivery Window
“So far this year, we’ve delivered more than 1.8 billion units to U.S. Prime members the same or next day — nearly four times what we delivered at those speeds by this point in 2019.”
By reintroducing its shipping service, Amazon aims to gain a more comprehensive grip on the entire consumer journey, allowing for greater influence over the delivery timeframe. This strategic move also reduces the reliance on third-party carriers like FedEx and UPS. This integrated approach could bolster the competitive stance of programs such as Amazon Flex among freelancers and gig economy workers.
One entity that might feel the effects of this move most acutely is UPS. In their most recent annual report, UPS disclosed that Amazon accounted for over 11% of their consolidated revenues in 2022 and over 15% of their accounts receivable.
The demand for delivery remains a significant aspect of the ongoing digital transformation in the retail sector, albeit with fluctuations based on the industry. A notable statistic from PYMNTS’ “12 Months of the ConnectedEconomy™” report reveals that, by the end of the previous year, an average of 131 million consumers across the country received online retail purchases every month. Interestingly, half of these consumers who ordered from retail merchants’ websites opted for home delivery, marking an 18% increase compared to the previous year’s figures.
Source: PYMNTS
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