Digital commerce may have seen an unprecedented growth of 44 percent in 2020, but it also presented a virtual nightmare when it came to order fulfillment for many sellers. Record import volume during the holidays forced an unmanageable inventory glut at West Coast marine terminals so severe that operators were unable to predict clearance until at least late spring of this year. And while supply chain management has always been a challenge for many e-tailers, logistics in 2020 proved to be more critical than in previous years.
The need for alternative logistics providers has never been more pressing. But few small businesses can afford to risk both the unsustainability and costs of air transport. Can Amazon Air fill that gap?
Amazon and the Rise of Cargo Airlines in eCommerce
Amazon has never been anything less than a customer focused entity. And for many customers, that means taking advantage of free delivery promises—especially for Prime customers. But Amazon has also historically admitted their mistakes. An unexpected peak holiday season in 2013 which resulted in a surge of refunds to dissatisfied customers forced the company to reimagine their logistics plan entirely, facilitating a growth of warehouses and shopping hubs which have been estimated at one per day in the U.S.
But 2013 was before both the advent of Amazon Prime and well before the current boom in eCommerce sales. When Amazon Air was first launched (naturally) as Amazon Prime Air in 2016, it seemed like a risky solution. But by 2019, the need for air cargo delivery was proving so strong that even traditional airlines including Delta and Lufthansa began offering their own digital order fulfillment solutions. And by 2021, Amazon Air had enjoyed such unparalleled success that the division recently announced the purchase of 11 Boeing 767-300 aircrafts to round out their expanding customer service base.
Sustainability and Air Transport
But Amazon Air’s expansion comes at a time in which sustainability is leading both business and consumer purchasing decisions. And it comes at a time in which even concerns about packaging materials are leading many consumers to question the environmental impact of eCommerce.
Amazon’s commitment to sustainability was prevalent in 2019 when the company co-founded the Climate Pledge, vowing to eliminate carbon entirely across all operations by 2040. And to date, Amazon claims to have eliminated over 500 million boxes and 244,000 tons of packaging materials from their delivery systems. But the impact of air cargo on the environment is a significant one; one which isn’t entirely limited to carbon-intensive fuel solutions. Amazon Air recently obtained six million gallons of sustainable aviation fuel produced by renewable resources and producing significantly less carbon emissions than standard fuel.
The expansion of Amazon Air will have an obvious impact on sustainability. But is that expansion able to meet customer demand?
Amazon Air—A New Rival?
Amazon Air’s fleet growth has been estimated to include 200 new planes by 2028, prompting a termination of their contract with fellow air cargo provider FedEx in 2019. Now evidence is emerging that number may easily match that of FedEx rival UPS.
A 2020 report issued by DePaul University indicated that Amazon’s drive for faster and more robust delivery options could virtually revolutionize the air cargo transport industry. And with ground shipping surcharges being previously announced by both FedEx and UPS, that’s certainly not a bold statement to make. But is Amazon hedging their bets on air transport delivery’s growth too soon?
Is Amazon Air Realistic?
Amazon’s total operating expenses in 2020 amounted to over $363 Billion, a good portion of which was the result of fulfillment services. But Amazon’s investment in fulfillment solutions isn’t about any immediate financial return, but maintaining an innovative edge in an increasingly competitive industry.
Amazon knows that their customers demand efficiency. And historically, they’ve delivered. But efficiency in 2016 looked quite different from efficiency in a post-pandemic world. Markets are growing increasingly more fragmented—and so are solutions. Whether or not Amazon Air’s expansion will be a viable solution to that fragmentation remains to be seen. Amazon knows their status isn’t based on sales revenue alone, but reputation.
A reputation which can sometimes return more than its original investment.
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