Amazon Following the Leaders...Again
What started as an online platform for selling books in 1995 has become one of the top five companies in the world by market cap. Amazon’s innovation and creativity have changed how we shop and forever altered our definition of “fast shipping.” In the past, Amazon relied on third-party carriers like FedEx and UPS to ship products. Now, the Pitney Bowes Parcel Shipping Index reports that Amazon Logistics is responsible for shipping 22% of all packages within the US. Compare that to 24% shipped by UPS and 19% shipped by FedEx.
As Amazon grows its logistics arm, we expect to see the visionary thinking we’ve become accustomed to seeing. Instead, as Amazon wades further into the waters of logistics, they are taking cues from FedEx and UPS.
Following in FedEx and UPS’s footsteps
In 2022, Amazon introduced a peak holiday surcharge for the first time ever. While the tech giant promised that “fulfillment fees during this peak period will remain an average of 30% less expensive for slower standard shipping methods than other major third-party logistics providers,” their choice to add surcharges suggests Amazon may be worried by the current financial climate and slowing e-commerce trend.
Adding peak surcharges may have been an easy opportunity to boost the bottom line after a rocky start to the year. Now, Amazon’s taken yet another page from the major carriers’ playbooks, shifting from an air network of mini-hubs to a larger hub-centric model.
Why did Amazon Air drop the mini-hub model for a hub-centric model?
While Amazon Air operates at airports across the country, a recent report by Chaddick Institute for Metropolitan Development shows that Amazon is gradually increasing activity at four hubs, Cincinnati-N. Kentucky (CVG), Fort Worth Alliance, San Bernardino International, CA, and Lakeland, FL, with flight activity increasing at each between September 2022 and March 2023.
In September 2022, Amazon Air operated 44 daily flights out of CVG. At the time of the report in March 2023, Amazon Air operated daily flights to 58. The scheduling of the flights also shifted from a schedule of non-clustered daytime flights to clusters of flights between 12:30 pm and 2 pm and 2:30 am and 4 am. This new model mirrors the major carriers’ structures and supports a next-day delivery model.
What began as a way for Amazon to support inventory movement has morphed into a foundation that, in conjunction with its trucking network, can rapidly transport packages across the country. Is Amazon setting up to enter the third-party shipping race? Only time will tell.
The good news is that no matter when you signed your contract, it’s never too late (or too early) to renegotiate. If Amazon enters the market with options for shippers outside their own supply chain, you can use that information to garner more effective rates with your current carrier. In most cases, ShipRx can help you lower your rates by 20-30% or more through our parcel rate negotiation services. With or without Amazon, get in touch and let ShipRx help you save money today.
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The End of Free Shipping?
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UPS and FedEx surcharges coming to an urban center near you
Attention shippers! If you send parcels to addresses in Boston, Chicago, New York, Los Angeles, or San Francisco, you may be surprised by additional fees on your next bill. UPS and FedEx announced new delivery area surcharges (DAS) for Save On Your Parcel Costs Today
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