Amazon

Amazon’s Big Logistics Network Plan

News about Amazon’s ambitions to launch its own logistics network has slowly leaked out over much of the past year.

Via whispers of drones, planes and ships — and even remarks during Amazon’s earnings calls with analysts — the eCommerce giant has made it clear that it wants to rely less on third-party companies, like UPS, and instead invest more into building its own shipping empire.

And new documents in a securities filing show that Amazon has given an even bigger hint at just what those plans will entail. According to those documents, Amazon is looking to build “companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline.” The documents also hint that Amazon wants to classify the business as a “transportation services provider.”

But that’s not necessarily saying that Amazon wants to replace its current partners; instead, it could mean that Amazon wants to build out its own logistics service to supplement where its outside relationships may not be paying off.

The Wall Street Journal points out that this is the first time in an official document such as this that Amazon has named its specific plans regarding the shipping business. Amazon did not provide any formal response to the filing.

It’s no secret, however, that Amazon was building this network. Amazon has already used its own trucks to move goods out of its warehouses and has worked to build up its logistics services in order to combat rising shipping costs through having its packages delivered through a third party. There’s also been talk about Amazon turning its logistics operation into a shipping option for other retailers.

WSJ article in late 2015 cited interviews with current and former UPS and Amazon executives explaining the changing nature of that relationship as those costs continue to rise. The real draw for Amazon to get into the delivery game is to take control over its own delivery times, as eCommerce’s popularity increase strains the traditional delivery carriers.

As cited by WSJ, Colin Sebastian, a Baird Equity Research analyst, said that the market for delivery, freight forwarding and contract logistics has the potential of being worth at least $400 billion.

“We continue to expect Amazon to add logistics, primarily to meet its own growth, but over time and in incremental fashion, we believe it is likely that Amazon will offer this expertise to third parties to help subsidize those costs,” Sebastian told WSJ.

But even in the earnings calls, Amazon has shown that its plans still involve keeping its shipping partners aboard.

“In order to properly serve our customers at peak, we’ve needed to add more of our own logistics to supplement our existing partners,” CFO Brian Olsavsky said during Amazon’s Q4 earnings call with analysts last week. “That’s not meant to replace them, and those carriers are no longer able to handle all of our capacity that we need at peak. They have been, and continue to be, great partners, and we look forward to working with them in the future.”

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