Hopp or top: Is Amazon Logistics shaking up the shipping industry?
Just a few years ago, customers of the e-commerce giant Amazon received their orders in the usual way: via DHL, Hermes, or another established shipping service provider. Even today, the retail platform collaborates with external companies to deliver orders worldwide. However, with Amazon Logistics – among other places in Germany – the online giant has also established its own structures to deliver packages quickly and efficiently to customers.
At first, the plans were not taken seriously. However, Amazon Logistics is now also influencing the parcel industry: DHL announced in March 2020 that it intended to 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 and thus passing fewer shipments to DHL and other parcel services.
This development has slowed down a bit recently. Of all things, the Coronavirus, which has catastrophic effects in so many industries, saved the DHL package center: Due to an increased order volume at Amazon, more orders also arrived at DHL’s neighbors again.
However, this is likely just a snapshot. In the long term, Amazon Logistics will even expand its own capacity. This has implications for both the shipping industry and Marketplace sellers – both positive and negative. Therefore, you should engage with this topic now to assess how the establishment of Amazon’s own shipping logistics may also affect you.
What exactly is Amazon Logistics?
With the internal delivery service, Amazon aims to become more independent from established service providers like DHL or DPD. To this end, the e-commerce giant collaborates with local subcontractors who pick up packages from the Amazon distribution centers for 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 United Kingdom, Spain, and the United States, mostly in large cities.
The drivers pick up the packages at a shipping center and deliver them directly to the customer. Typically, they travel distances of up to 120 kilometers. The advantage lies primarily in the elimination of external structures such as the delivery to a DHL package center, the subsequent sorting, and the transport to the destination. Amazon Logistics manages to shorten the shipping for many shipments to the so-called last mile through collaboration with local companies – saving not only money but especially delivery time.
Because 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, increasing their satisfaction and 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 transport service, which will then be reviewed by Amazon. This is even possible if the company necessary for the collaboration still needs to be founded. 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 euros 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 at 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 includes a leasing program for the vehicle fleet, a fuel program, uniforms, and support in legal matters.
What service does the Amazon shipping service offer customers?
The internal shipping service is not a freight forwarder in the traditional sense, 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.
Typically, the transport 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 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 clearly lies in the fast and uncomplicated delivery. They often receive their goods the very next day and know exactly in which time window they should be at home. Otherwise, they can also 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 Saturday.
What does Amazon Logistics mean for Marketplace sellers?
Merchants 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-promoting Prime logo without using FBA.
For FBA sellers, Amazon Logistics is usually a reason for joy. Because they indirectly benefit from the increased customer satisfaction and loyalty, as this increases the likelihood that a product will be purchased from them again.
However, for sellers using FBM or Prime by Seller, the enthusiasm is likely limited. Because for them, the already high pressure to provide fast and smooth shipping continues to increase. Currently, this additional pressure from Amazon Logistics may not be noticeable, but that 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 are demanding faster shipping. Additionally, Amazon Logistics is shaking up the shipping industry due to delivery times and uncomplicated service, posing the question to established companies of how they can maintain all 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. Not only do customers 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 purchase again.
Image credits in the order of the images: © phaisarnwong2517 – stock.adobe.com / © Carlos Cuadros – pexels.com
