Amazon Logistics to lease jets – Bad news for couriers

Amazon are looking to lease 20 Boeing 767 jets for air freight operations within the US, according to The Seattle Times. This will put them in direct competition with their US carrier partners such as FedEx and UPS.

Amazon appear to have a desire to own an end to end fulfilment operation to support their own retail sales and third party partners. Amazon Logistics is growing ever more rapidly in the US and the UK and in fact has to in order to support Amazon Prime Now – one hour deliveries in major cities.

Amazon have over a dozen Amazon Logistics depots already in the UK, we know of 14 of them. These depots can have up to 40 warehouse operatives and employ hundreds of drivers per depot, contracted from local independent courier companies.

Every driver that Amazon puts on the road represents at 10 of 1000s of parcels lost to traditional carriers. We estimate that their Bardon depot in the Midlands has capacity to handle at least 10 million parcels per year and that’s traffic which previously external couriers would have provided.

Expansion of Amazon Logistics probably doesn’t bother the delivery drivers that much, many couriers already franchise out local delivery depots and the drivers aren’t employed directly by the courier – they’ll go where the money is and if that’s Amazon Logistics, so long as they’re kept busy, they’ll show up for work.

What will happen however is that couriers, just like Royal Mail, will start to see shrinking volumes and we could see courier profit warnings as Amazon’s capacity grows.

Amazon’s long term goal is a fanatical focus on customer service, nothing else matters. They don’t care about profits and they don’t care what it costs to get the job done. If they believe that creating a private delivery network in the UK to work alongside their Fulfilment by Amazon (FBA) service than that’s what they’ll do.

We’ve already heard that Amazon Logistics are going to start collections from a few selected non-FBA Prime eligible retailers. It will be no surprise to hear rapid expansion of Amazon Logistics collection services to sit alongside their delivery capability. In fact it’s inevitable, why wouldn’t Amazon want their own network to speed product from the retailer to the consumer if they believe that they can do a better job than traditional couriers?

At some point in the future, be it a year, five years or ten years, Amazon won’t need to depend on external couriers. What effect that will have on the courier network in the UK remains to be seen, but it’s going to leave a major hole in the capacity couriers have built and they’ll be reliant on sales to other retailers to fill the shortfall. Amazon is the biggest online retailer out there though, will we see more couriers go bust or will general ecommerce grow large enough to fill the gap?