Amazon Now Delivers Half of its Own Packages
For years, Amazon has been working towards moving logistics in-house, and now that master plan is working. According to Morgan Stanley, the e-commerce giant has more than doubled its delivery capacity, reaching a total of 2.5 billion packages delivered this year—a number that is slowly but surely creeping up to UPS and FedEx.
“We see more of this going forward as our new bottom-up US package model assumes Amazon Logistics US packages grow at a 68% [compound annual growth rate from 2018 to 2022],” Morgan Stanley said. That would mean a whopping 6.5 billion packages annually in just two years. For UPS and Fedex, those compound estimates are looking like 5 billion and 3.4 billion, respectively for 2022.
“To us, Amazon Logistics is already-large scale and with a fleet ~1/5 the size of competitors, it speaks to its ability to use density and technology to drive efficiency,” Morgan Stanley said.
One of the main reasons for this wild success is Amazon’s focus on densely populated areas. A breakdown of the delivery locations shows that 61 percent of Amazon Logistics’ package volumes are from suburban areas, 28 percent are from urban areas, and just 11 percent are from rural areas. To compare, UPS and FedEx are both shipping about 20 percent of their packages to rural areas.
Amazon is getting creative too and sparing no expense. The drone army is slowly catching on, and Amazon Air is expected to put at least 70 planes in the air for package deliveries by 2021. Not to mention, Amazon has implemented one-day deliveries and partnered with companies for more BOPIS (buy online, pick up in store) options. In October, Amazon spent $9.6 billion on order fulfillment over the course of three months.
“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year,” said CEO Jeff Bezos on an earnings call in October. “It’s a big investment, and it’s the right long-term decision for customers.”