As Amazon looks to gain efficiencies by building its own fulfillment capabilities, including controlling the last mile, its once strong relationship with shipper United Parcel Service is coming under question, the Wall Street Journal reports.
Amazon has garnered its own fleet of trucks and is experimenting with a variety of ways to complete the last delivery mile, including partnering with newspaper couriers, hiring drivers Uber-style, and, famously, working on a delivery drone program.
Meanwhile, UPS’s delivery costs are rising, and it’s tried to shift some of them by including dimensions as well as weight in calculating its fees, for example. The shipper’s margins have shrunk as it increases its capabilities and capacity while e-commerce surges, driven largely by Amazon, which represents more than $1 billion in UPS business.
UPS has long valued that good business; indeed, the shipper granted Amazon a hefty discount of some 70% when the e-retail’s Prime program was in its infancy in 2005.
But its best customer may be emerging as a competitor, according to reporting by the Wall Street Journal.
Amazon has been experimenting with ways to seize back some of its fulfillment and the last miles of delivery. But that hasn’t always been smooth.
Amazon Logistics, the company's delivery unit, doesn’t have the same track record of speed or accuracy as does UPS. While Amazon has made a business of undercutting retail prices to gain market share, that may not be so easy when it comes to delivering packages. Indeed, Amazon Logistics has a reputation for missing items and delays. While record e-commerce orders at the holidays two years ago overwhelmed the on-time delivery rates of UPS, FedEx, and the post office, those shippers stake their reputations on efficient and accurate deliveries.
If Amazon is to protect its own stellar record for customer service, it may want to keep a close eye on its delivery business. Speedy and inexpensive delivery are the keys to e-commerce success, and a troubled delivery record could quickly wreck an e-commerce business — even Amazon’s.