Hopp or Top: Is Amazon Logistics Disrupting the Shipping Industry?
Just a few years ago, customers of the e-commerce giant Amazon received their orders through the usual channels: via DHL, Hermes, or another established shipping provider. Even today, the marketplace collaborates with external companies to deliver orders worldwide. However, with Amazon Logistics – including in Germany – the online giant has also established its own structures to deliver packages quickly and efficiently to customers.
Initially, the plans were not taken seriously. However, Amazon Logistics is now influencing the parcel industry: DHL announced in March 2020 that it would close a parcel center near Augsburg because the neighboring Amazon logistics center was no longer generating enough shipments. This was by no means due to a decline in order volume – rather, Amazon is increasingly handling the shipping volume with its own logistics, resulting in fewer shipments being passed on to DHL and other parcel services.
This development has slowed down somewhat recently. Ironically, the coronavirus, which has had catastrophic effects in many industries, saved the DHL parcel center: Due to an increased order volume at Amazon, more orders were also received by DHL’s neighbors.
However, this is likely just a snapshot. In the long term, Amazon Logistics will even expand its own capacity. This will have both positive and negative effects on the shipping industry as well as on marketplace sellers. Therefore, you should engage with this topic now to assess how the establishment of Amazon’s own shipping logistics may affect you as well.
What exactly is Amazon Logistics?
With its internal delivery service, Amazon aims to become less dependent on established providers like DHL or DPD. To achieve this, the e-commerce giant collaborates with local subcontractors who pick up packages from Amazon distribution centers in a specific area and handle the actual delivery to the customer. These are usually smaller companies with 20 to 40 delivery vans or 30 to 70 drivers. Currently, the service is available in Germany, the UK, Spain, and the USA, primarily in major cities.
The drivers pick up the packages at a shipping center and deliver them directly to the customer. Typically, they cover distances of up to 120 kilometers. The advantage lies primarily in the elimination of external structures such as delivery to a DHL parcel center, subsequent sorting, and transport to the destination. Amazon Logistics, through collaboration with local companies, manages to shorten the shipping process for many shipments to the so-called last mile – saving not only money but especially delivery time.
Many users want to take advantage of same-day delivery or receive their order at the latest the following day. For Prime products, Amazon even promises this. This aspect is particularly important to customers, enhancing their satisfaction and increasing the likelihood that they will order from Amazon again next time. The logistics service effectively improves the customer journey and customer loyalty.
How can companies participate in Amazon Logistics?
Interested entrepreneurs can submit a first expression of interest through the website of the transportation service, which will then be reviewed by Amazon. This is even possible if the necessary company for collaboration has yet to be established. According to its own statement, Amazon is looking for customer-oriented leaders who “enjoy leading teams in a dynamic, constantly evolving environment.”
After a formal application, in which liquid assets of €25,000 must be demonstrated, and an approval from Amazon, the future delivery partners undergo several weeks of training. Additionally, the online giant provides many tools, such as for navigation. Once the company is established and enough drivers are on board, the first packages are picked up from the local logistics centers and delivered to customers. Typically, Amazon pays per successful delivery.
However, the subcontractor is responsible for the hiring of drivers and the procurement of delivery vans. Amazon Logistics only provides supporting offers in Germany to ensure low startup costs. This also includes a leasing program for the vehicle fleet, a fuel program, uniforms, or support in legal matters.
What service does the Amazon shipping service provide to customers?
The internal shipping service is not a traditional freight forwarder, as the Delivery Service Partners (Amazon logistics partners) work exclusively for the e-commerce giant and are bound to the structures of the online platform.
In general, the transportation service even offers a better service than other carriers. For example, Amazon Logistics provides detailed shipment tracking in addition to the mandatory shipping confirmation for each order. This allows customers not only to check the time window in which their order is expected to be delivered but often also to track the route of the delivery vehicle and see how many stops the driver will make beforehand. In this sense, customers have live tracking of their order with Amazon Logistics and can see exactly when and where the package is shipped, delivered, and ultimately arrives. This gives the shipping company a significant advantage over traditional package tracking.
The biggest advantage for customers is clearly the fast and hassle-free delivery. They often receive their goods the next day and know exactly what time window they should be home. Alternatively, they can specify a drop-off location or have the goods delivered directly to a pickup station. Like other parcel services, Amazon Logistics also delivers to its customers on Saturdays.
What does Amazon Logistics mean for marketplace sellers?
Sellers on the online trading platform have various shipping options. Fulfillment by Merchant (FBM) means that they handle the storage, packing, and shipping of the goods themselves. In contrast, they can also delegate these and other tasks to Amazon by participating in the Fulfillment by Amazon program (FBA). As a third option, sellers can qualify for Prime by Seller and thus receive the sales-boosting Prime logo without using FBA.
For FBA sellers, Amazon Logistics is usually a reason for joy. This is because they indirectly benefit from increased customer satisfaction and loyalty, as it raises the likelihood that a product will be purchased from them again.
For sellers using FBM or Prime by Seller, enthusiasm is likely limited. This is because the already high pressure to provide fast and smooth shipping continues to increase for them. While this additional pressure from Amazon Logistics may not be noticeable yet, it could change in the future. Therefore, marketplace sellers should prepare for this now and refine their internal processes to optimize them.
Conclusion: Hopp and Top!
On one hand, many sellers are already feeling today that customers demand faster shipping. Additionally, Amazon Logistics, due to its delivery times and straightforward service, is shaking up the shipping industry and posing the question to established companies of how they can maintain all their current locations.
On the other hand, FBA sellers and customers are pleased that packages are delivered quickly and that the customer journey is increasingly resembling that of brick-and-mortar retail. Customers not only receive a shipping confirmation but also detailed shipment tracking. This increases the conversion rate, lowers the return rate, and raises the likelihood that customers will make repeat purchases.
Image credits in the order of the images: © phaisarnwong2517 – stock.adobe.com / © Carlos Cuadros – pexels.com
