UPS, FedEx,DHL have a new competitor: Amazon?

Barcelona, January 14, 2016.- Amazon intends to buy the remaining 75% of French delivery company Colis Privé. Amazon started as an online bookstore and today can become a logistics operator that competes with UPS, FedEx or DHL. Global technology giants are interested in logistics. What changes will these new logistics competitors ?. The end customer is the main beneficiary with a time of ever shorter delivery ?. What will the reaction of traditional logistics operators ?. Regarding this news release then a magnificent story published by The Seattle Times on 11 January:

Within a few weeks, Amazon.com will begin competing directly with longtime partners United Parcel Service, FedEx and DHL. But not in the United States. At least, not yet. Sometime in the first quarter, Amazon is expected to acquire the 75 percent of the French package-delivery company Colis Privé that it doesn’t already own. Though the French company is small relative to the multinational giants that move Amazon parcels around the globe, the acquisition will be the biggest step yet that the online retail giant has taken to move into the business of delivering packages for others, as well as itself. Amazon has said little about its intentions. In 2014, it bought a 25 percent stake in Colis Privé. A spokesperson told the French newspaper Le Figaro last year that the deal to acquire the rest of the company would close early this year. And the unidentified spokesperson said Colis Privé will continue offering package delivery for all customers, not just Amazon.

But some analysts believe that Amazon is putting together the pieces across the globe to launch a package-delivery service that will one day compete with UPS, FedEx and others. In addition to the Colis Privé deal, Amazon acquired the right to purchase 4.2 percent of Yodel, a United Kingdom parcel-delivery company, in 2014. Last month, Amazon announced adding thousands of trucks to its U.S. fleet to handle the growing load of packages it is shopping. The Seattle Times also reported last month that Amazon is negotiating to lease 20 Boeing 767 cargo jets. Those jets would represent a significant expansion of an Amazon cargo trial in Wilmington, Ohio, operated by Air Transport Services Group on Amazon’s behalf.

Amazon wants to build out its own U.S. cargo operations to avoid delays from carriers such as UPS and FedEx, which have, at times, struggled to keep up with the rapid growth of e-commerce. This past holiday season, FedEx failed to deliver some Christmas packages on time, blaming inclement weather and a surge in last-minute holiday shopping. Two years earlier, it was UPS that struggled with the crush of holiday shopping. But Robert W. Baird & Co. analyst Colin Sebastian believes Amazon may be developing a delivery service that meets more than its own shipping needs. He expects Amazon to ultimately offer any excess cargo capacity it has to other companies looking to transport goods.

Amazon has welcomed all comers to AWS, including rivals such as Nordstrom, which competes with Amazon in retail apparel and shoes, and Netflix, which battles with Amazon Prime Instant Video in on-demand subscription programming. In the process, it has turned an expense — the cost of running its computing operations — into a profit center. In the third quarter, AWS posted a 25 percent profit margin, an eye-popping number for a company whose other segments generally generate the narrowest of profits or the more-than-occasional losses. Amazon plows those profits back into its other businesses, keeping prices low on the retail site and investing in new markets as well.

Shipping, of course, is a huge expense for Amazon. In the third quarter, Amazon spent $3.2 billion on fulfillment, the costs related to delivering packages to customers. It’s a huge number that increases every year as Amazon grows and invests more and more into speeding up delivery to better compete against brick-and-mortar rivals, which offer customers something Amazon can’t: instant gratification of owning an item the second it’s parchase. The shipping business is immensely complex. To succeed, Amazon would have to compete with companies that have long been its closest partners.

Amazon would likely use the planes it is negotiating to lease, its growing truck fleet, and the urban delivery infrastructure it has created across the country to move packages for customers. And it would likely open up the analytics and optimization algorithms it has developed to improve efficiency for delivery customers, Sebastian said. It might even make space available in its 123 warehouses around the world to companies that want the ability to warehouse items close to where the items ultimately would be shipped. For their part, both UPS and FedEx have said little about the possibility of having one of their largest, if not the largest, customers as a competitor. UPS spokesman Steve Gaut declined to comment, except to call Amazon a “valued customer.”

In its annual 10-K filing with the Securities and Exchange Commission in 2014, UPS noted the peril of having one of its largest customers “develop their own shipping and distribution capabilities,” saying such a development, among others, “could materially impact the growth in our business and the ability to meet our current and long-term financial forecasts”. In its quarterly earnings call with analysts last month, Frederick W. Smith, FedEx chairman, president and chief executive, noted in response to a question about the potential competitive threat from Amazon that FedEx has a vast logistics network that would be hard to replicase. “FedEx is a highly integrated global transportation network, in fact, one of only two operating at a significant scale in the United States today, and only one of three major delivery networks in the U.S. — the other two being UPS and the United States Postal Service,” Smith said. “That’s not likely to change in the foreseeable future, as these networks are very capital-intensive and information-intensive.”. With the pending acquisition of Colis Privé, though, Amazon seems ready to give it a shot.