Shipping: Good bye UPS, hello Amazon?

[Slamz]

In years past I have given a small Amazon gift certificate to my UPS driver because I do virtually all shopping online and my front door is the least convenient in the neighborhood. I get a lot of boxes up a long sidewalk. I figure I owe the guy a tip.

I was looking to see if the next package was going to be coming via UPS so I could leave the card out but noticed it was being delivered by Amazon shipping: AMZL US. I looked back over numerous other orders and actually almost all of them have been delivered by AMZL US. A few small ones come by USPS (probably all the ones that weigh under a pound, now that I think about it).

Not sure how widespread this service is. I wonder if UPS is feeling any squeeze from this. Amazon has to be a reasonable portion of their business.

I'm not actually sure I have an "Amazon Driver" though. UPS seems to do routes so you generally get the same dude delivering each time. My impression is Amazon is more like Uber: I don't think they do routes but it's more like here's some stuff, go drop it off, NEXT. Just my impression based on the fact that when I see their vehicles it's always something different. Could be a white van. Could be a suspicious looking character in a Toyota Corolla.

Service hasn't changed at all that I've noticed.

Looks like you can just step up and apply to deliver packages too. Again reminding me of Uber:
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Curious if Amazon is making a move on the delivery business. Doesn't seem like it would be a big step for them to compete directly with UPS/FedEx if they started doing pickups too. Apparently they're already working on the air freight portion:
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[TinStar]

Well.. I work from home so I typically see the delivery guy out my office window as he walks up and most Amazon packages that we get delivered are from an unmarked (typically crappy and beat up) car and the delivery guy is wearing whatever they want and is typically not well dressed.

We still get deliveries from UPS for bigger items as the Amazon deliveries are typically small-medium boxes. And USPS still does some of the smaller items(although occasionally they will have a medium box). Fed Ex is still doing well as well..

I personally know a couple of UPS drivers and they are working their asses off right now. I know 1 Fed Ex employee and he also appears to be broken down and tired right now

I'm sure if the volume of packages wasn't also going up, UPS/Fed Ex would be taking a hit, but overall online shopping is through the roof right now. Jeff Bezos is now the richest man in the world and I doubt he will be losing any business.

[strife]

How close to is an Amazon warehouse from you? My impression was things shipped from their local warehouses would come from the amazon uber people, but items shipped from the larger warehouses would still come ups(or usps)

Looks like most of the packages I have in my history show USPS as the shipper, so maybe they do the heavy lifting and the amazon ubers pick it up and get it there quicker in order to meet the 2 day window.

[Zouji]

You still have to get items from the main warehouse to a location for drivers to get things for delivery. Unless Amazon is hiring a trucking fleet, I don't think they are really going to be competing that much.

[Zouji]

It looks like they bought trailers but didn't buy trucks. So they will still need to use a trucking company to ship things from A to B.


If they did everything on there own, then they may run afoul of the Anti-Trust laws.

[Vllad]

There are two issues driving this.

1. Operating authority. Their are two kinds of licenses that the government issues for carriers. Carriers for hire (your standard carrier) and Household goods/Personal goods carriers. The reason for this is there are laws that govern tighter restrictions for moving Household goods. There is a 200 year history of people being robbed or abused when it comes to household goods since people have so little leverage vs. commercial customers. Household goods carriers are carrier like Allied Van Lines who move people from one home to another.

Amazon moves a ton of personal/household goods so their is literally not enough capacity for them to deliver those kinds of products. UPS and FedEx are not licensed to move Household goods nor are they going to be doing it anytime soon. Their is too much liability and of course there is issue number 2 below. Ultimately Amazon needs a type of carrier that really doesn't exist today.

2. There is no money is this business. It is a poor business model for carriers to take on Amazon. We move a ton of there shit now and it is simply not profitable. We had to restrict them as a customer because there freight is shit. Amazon will even lose money moving there own cargo. Un-like carriers they can try to make up for those loses by charging more else where.

Essentially Amazon working the way it does requires a poor supply chain and lots of sunken cost into DC's and shelf space to accommodate there customer market. They simply can't afford to pay for all the distribution required to keep it running. There only chance is to build there own local cartage carrier capacity in the hopes they can keep cost down.

The problem with the Amazon model is the liability will eat them up eventually unless they start charging more. This is just local cartage, they aren't getting into moving the line-haul cargo so there will be limitations to what they can do directly. This is a win for everyone in the short term. Amazon can keep trying to move there stuff cheaply and we can stop losing money and raising there rates.

In the long term the cost to move a box to someone's home is more than people are willing to pay. Amazon will have to eventually figure out where they can hide that cost in order for them to maintain this cartage program permanently.

Let's see what happens when they start hiring drivers, need capacity they simply can meet, and finally what do they do when the first story comes out where a drug induced driver assaulted a mother of 3. Good luck with that.

The Amazon business model is probably 50 or 60 years a head of its time. If we get to the technological point where we could deliver cargo that doesn't require drivers, trucks or have to follow transportation regulatory laws then maybe they are on to something. Their distribution model would still suck but at least then you could eliminate the required transportation to support it.

[TinStar]

Yeah I find it amazing that Amazon can turn a profit on Prime (granted, I have no idea how their pricing structure works). For instance. I recently purchased a shitty phone case and a screen protector and the total for that purchase was $12.83 (don't judge me, I'm still looking for a better case! ). The order was placed on Wednesday. One item was in Florida and one was in San Antonio. They arrived in Houston separately and then were packaged together and transferred to USPS as 1 package and delivered to my house on Friday. I paid $12.83 for that. So how much of that $12.83 did Amazon make? How much did the seller make? I mean yeah, I paid for Prime (which is what like $80???), but we have also placed 62 orders this year and some of those have been large orders(like bumpers for my Jeep...). All ships free..

Whereas, in my business, I get a single shoe shipped from Chelmsford, MA from New Balance Footwear Inc (obviously a large whole-seller who has to have some sort of cheaper shipping rates from UPS), and that package costs me about $13 just to ship it.

[Vllad]

I don't know where there revenue is at but it certainly isn't in the shipping. They are losing their shirts on shipping cost. They are always screaming bloody murder about it. My best guess is most people sign up for Prime and don't use it fully?

[Zouji]

I guess this is what happens when a tech company goes into shipping. I guess geeks aren't amazing at managing sprawling logistics centers at a reasonable cost. I'm guessing that they are hoping that AI learning helps to reduce down some of the flaws in the distribution/shipping model?

I'm assuming they make a lot of there money from customer information and steering customers to certain products. Goods aren't the only commodity being shipped these days. People's information, shopping habits, and preferences are a huge commodity.

[Vllad]

I guess this is what happens when a tech company goes into shipping.

This happens to a lot of tech companies. Apple, HP and Amazon all suck at logistics and lose so much money with bad supply chains. They don't really hire logistics people to handle there supply chain. They hire tech people. Apple is the worst. It is like talking to children.

Walmart on the other hand hires professionals and they know there shit. You need grade A people to hold a conversation with Walmart.

[Zouji]

Walmart moves a fuck ton of stuff around the country and from overseas too. They go through a mind boggling amount of stuff and have to have that stuff replenished. In order to beat other peoples prices they have to know there logistical shit. That and they wave there dick around when it comes to bulk purchasing power.


I know books have been written about just how to deal with Walmart in negotiations.

If Walmart was a country then they would have the 25th or 26th highest GDP in the world.

[Slamz]

I have picked up on more people doing online shopping through Walmart because increasingly the prices are cheaper than Amazon and the online experience has been improving. Interesting to hear that they beat the pants off of Amazon in terms of logistics/know-how. I thought Amazon was top tier. If Walmart is top tier then maybe they could actually transition into the next Amazon -- or at least into a realistic online competitor. Makes me think more about their stock, for sure. Walmart stock has barely moved in 5 years compared with Amazon's 600% growth. Will Walmart be the next 600% growth stock as they start to move into the online market while still being the brick and mortar store of choice in rural areas?

[Vllad]

Companies like Amazon and Apple are like hippies explaining why commune's are the new utopia of the future. Walmart is like Nazi's forcing commune's to operate on behalf of the state.

Walmart puts more time in making smart decisions in order to make money and control cost than most other companies do. They are exceptional at hiring the right people to make decisions. If money can be made in a market Walmart will beat you. If Walmart decides to heavily compete with Amazon they will crush them. If they don't it is because Walmart knows there is no money to be made there.

There are even smarter companies than Walmart. Autozone, 7-Eleven and SpaceX are even better at Walmart than Walmart is. Ironically low margin companies don't get the credit they deserve. It is not entirely unheard of for small profit companies to be the best engineered out and work the smartest for the small revenue they get.

Walmart just does the same thing but only in a large profit margin area.

That is why fat margin tech companies like Google, Apple and Amazon are really not run that well. They make money anyway. Walmart is the only fat margin company I know of that runs itself like they make no money at all.

Just look at the following list.

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Most companies that make these kinds of list are because there stock prices have grown. That doesn't mean you are well run at all. The best run companies are never the ones with the most stock growth.

[Vanraw]

Amazon gets alot of its profit from its AWS. Its really been kicking ass in this space. It owns like 30% of the market in Datacenter services. The ecommerce business is big in income, but the margins are terrible. I bet they cry like little babies when begging for a deal from Fedx..

Their AWS margins were over 25%. Which is crazy. Its going to be interesting to see how it evolves, since those type of profits always attract competitive focus, but in the hosting business, companies have not done well. Verizon got its ass kicked and dropped out of the business.

"AWS remains the profit engine for Amazon, which has always operated on thin e-commerce margins. While AWS accounted for 10 percent of Amazon's total revenue in the quarter, the unit generated operating income of $1.17 billion, while the company as a whole had operating profit of just $347 million."