Does Buy with Prime open the 3rd party delivery door? (Photo: Jim / )
About six years in the making and maybe not how it was originally envisioned, Inc. has opened its delivery doors to other online stores. Only time will tell how far Amazon goes with this.
It is the very last part that some will seize upon as proof that Amazon, after half a decade of speculation, would finally launch a delivery service aimed at businesses not using its retail or fulfillment offerings. It is an area that Amazon CFO Brian Olsavsky may be asked to comment on Thursday afternoon when Amazon hosts analysts following the release of its first-quarter results.
Last Thursday’s announcement was a baby step. Amazon appears to be testing the shallow waters to gauge merchant response to the program. Because it does not offer pickups except in very rare circumstances, it is not considered a bona fide integrated carrier in the mold of FedEx, UPS and the Postal Service. UPS, which generated 11.7% of its $94 billion in 2021 revenue from Amazon, doesn’t appear to be concerned about any encroachment. UPS CEO Carol B. Tomé on Wednesday called the program a “very clever marketing play” by Amazon. However, she said that UPS’ competitive position isn’t threatened by Amazon allowing other merchants to offer Prime services.
UPS and Amazon have reached what Tomé called a “mutually beneficial” agreement whereby Amazon effectively handles parcels that UPS isn’t interested in delivering.
Dean Maciuba, managing partner, U.S., for Crossroads Parcel Consulting, said the program will have some impact on the other parcel carriers because merchants that were self-fulfilling their orders with the carriers will switch their fulfillment to Amazon should they agree to join. However, Amazon “is still not close to possessing the capability to act as an integrated carrier and to compete directly … for third-party business” that is not related to its e-commerce business, Maciuba said.
Trever Outman, founder and co-CEO of consultancy Shipware LLC, sees it differently. By “wading into the shallow end of the competitive waters” with the limited rollout, Amazon can test the fulfillment and delivery performance of orders not placed on its site, Outman said in a LinkedIn post earlier this week.
Outman said the controlled launch is the “first half” of the game where Amazon gauges retailer and consumer demand, works out the invoicing and pricing models, and builds final-mile delivery density. Once it has checked off those boxes, Amazon will open the program to select outside retailers, Outman said.
Amazon had been working on the program until the Covid-19 pandemic put it on hold; in fact, it had eight major sort centers nationwide to service non-Amazon accounts, Outman said. “It’s not a stretch to suggest that major retailers with pickup density in those areas are currently talking and planning with Amazon,” Outman said in the post.
“We’ve all seen the playbook from Amazon before,” said Outman. “They’re methodical, they follow the data, and they play for keeps.”
