It’s more than a little humbling to realize the growth of Amazon in non-retail segments. But it’s less a question of their end revenue as much as their investments. Amazon’s capital expenditure saw an 80 percent increase during Q1 of 2021, largely as a result of its investments in logistics—now operating at a 50 percent greater capacity than the previous year. Amazon may not have the track record of UPS or FedEx just yet. But they’re not afraid to compete. Amazon reportedly handled 415 million domestic packages in July of 2020 compared to the 311 million delivered through FedEx. That’s over 100 million more packages delivered outside of Prime Day’s normal schedule. And while much of that volume is the result of increased reliance on digital purchasing, there’s little doubt that Amazon’s rapid fulfillment and delivery process has played a massive role in their visibility as a logistics provider.
It’s a process that Amazon innovated. And it’s one that many consumers have come to take for granted, with over a third of shoppers indicating they’ve used same-day delivery options during the month of February 2021 alone. There’s very few online retailers who don’t provide same or next day delivery options. And more and more of those retailers are having their orders fulfilled by their chief competitor: Amazon.
Amazon Multi-Channel Fulfillment: Opportunity and Flow
Virtually every retail process from manufacturing to delivery has been plagued with critical delays and costs over the past year as a result of the ongoing global supply chain crisis, not the least of which has been fulfillment. And while both sellers off Amazon continue to rely on FedEx, UPS and the US Postal System for shipping options, higher volume merchants are finding themselves at the mercy of skyrocketing rate increases as well as a diminishing quality of service. Alternative third party logistics services may have historically provided a greater degree of flexible and customized options, but they’re not always equipped to handle the sales volume many sellers have seen over the past two years.
Amazon’s Multi-Channel Fulfillment (MCF) services has filled the gap between reliance on third party providers and last mile delivery by leveraging their own internal logistics services regardless of where an order originates. Unlike third parties where an order is picked up once a day from a centralized hub, MCF enables multiple batches to be received and sent out from any of Amazon’s 200-plus global fulfillment centers—allowing a continuous flow of deliveries and information regarding delays, ETAs and cutoff times. That includes orders originating from both stand alone digital commerce sites as well as chief competitors including Shopify, Etsy and eBay.
So why exactly is Amazon offering logistics to their rivals? Skeptics may scoff, but it’s not for the sake of profit. It’s for the sake of opportunity.
Logistics: A Key Outpost in Amazon’s Non-Retail Empire
While many Amazon FBA sellers have long been aware of MCF for over a decade, Amazon has never insisted on strict exclusivity as a retail platform. Despite public outcry over their potential monopolization of digital commerce, Amazon’s fully aware that increased competition ultimately strengthens both brands and retailers. Digital commerce is a fairly big sandbox, after all. But that sense of embracing broader competitive categories isn’t isolated to eCommerce. It’s an increasing and highly visible hallmark of Amazon’s larger vision towards expansion.
A 2021 study released in August from Keystone Economics projected that Amazon was on track to spend over $120 Billion on domestic infrastructure services by the end of this year, including the addition of an estimated 840,000 jobs in the US workforce. As retail eCommerce sales are predicted to inch just under $1 Trillion in the US in 2021, logistics will play a critical role in solidifying Amazon as a leader in business segment innovations far beyond digital retail. It’s not merely a question of necessity. It’s a question of opportunity.
It’s an opportunity very few of Amazon’s competitors have seized on. Walmart may have a considerably greater price advantage. But Walmart hasn’t expanded into air cargo. Having pioneered the usage of cloud based storage and infrastructure, Amazon Web Services is equally on par with IBM or Google. But neither IBM nor Google would have likely considered purchasing one of the most prestigious legacies in the entertainment industry.
Amazon is no longer simply a shopping destination. It’s a phenomenon that has transformed the very way consumers engage with industry across multiple segments. Skeptics may criticize their continued investments and presence in non-retail industries. But it’s not without precedence. The only difference is Amazon’s share in the digital economy as a whole. Amazon has become virtually synonymous with eCommerce. And as the events of the past two years have shown us, the effects of digital commerce have a significant impact on the physical economy. Opportunity doesn’t mean monopolization. It means expanding boundaries; something Amazon has proven more than capable of.
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