Amazon.com CEO Jeff Bezos said in an interview at Recode’s 2016 Code Conference traditional parcel couriers like the U.S. Postal Service and UPS simply can’t provide all the last mile capacity the company needs, especially during peak shipping times.
Remember how Amazon.com Inc. was supposedly going to become a logistics provider and small package carrier to rival the likes of FedEx and UPS? Well, we might want to pump the brakes on that theory, according to Amazon CEO Jeff Bezos.
It’s true that the e-commerce giant has been expanding its in-house shipping operations. News broke back in January that an Amazon subsidiary had registered as a foreign-owned non-vessel operating common carrier (NVOCC) with the Federal Maritime Commission, a move that essentially gave the company the ability, at least on paper, to provide ocean freight services for other companies.
In its annual 10-K report submitted to the U.S. Securities and Exchange Commission, Amazon for the first time ever referred to itself as a “transportation service provider,” further fueling speculation the company might be entering the freight transportation business.
Then in March another affiliate, Amazon Fulfillment Services, reached an agreement with Air Transport Services Group to lease 20 Boeing 767 freighters and operate an air cargo network to serve the online retailer’s customers in the United States.
At the same time it is expanding its logistics capabilities, however, Amazon is spending more with traditional parcel carriers like UPS and the U.S. Postal Service, Bezos said in an interview at Recode’s 2016 Code Conference.
Bezos told the audience Amazon isn’t looking to take over last-mile delivery, but it is aiming to supplement it heavily. The issue, according to Bezos, is that carriers like UPS and USPS simply don’t have the capacity to handle all of Amazon’s volumes, especially during peak shipping periods.
“So what’s happened is – and this happened first in the UK – the Royal Mail ran out of capacity at peak,” he said. “So we have to plan, just like any company would. We have to have capacity, not for the average load, but for the peak, and in countries that have holiday selling seasons, which is most countries, there is a very big peak ahead of whatever the annual gift giving holiday is in that country.”
Bezos said that this practice hasn’t been necessary on the same scale in the U.S. as in the UK, where Amazon is not handling about half of its last mile deliveries with its own trucks.
Asked if he was trying to put FedEx out of business, or at least get better prices from them, Bezos joked that of course the company would like better prices, but said this was not the intention of Amazon’s logistics operations.
“Well we always like better prices,” he said. “Better prices on transportation would be acceptable to us. But what I’m really saying is that we are driven to supplement their capacity. We will take all of the capacity that the U.S. Postal Service will give us, and that UPS can give us, and we still need to supplement it.”
“So we’re not cutting back, we’re growing our business with UPS,” added Bezos. “We’re growing our business with U.S. Postal Service and still we’re supplementing it. And I predict that that will continue for some time, as long as you guys keep shopping.”
Bezos: Amazon looking to supplement parcel carriers, not replace them
