Essentially, the optimization of the Amazon fulfillment supply chain indicates why external expansion beyond the Amazon retail sphere would be an abjectly poor decision. This is a gigantic reduction, however, the causes behind the reduction also underpin reasoning to eschew an all-out assault on FedEx and UPS. Amazon estimates that shipping a package via their internal network results in a roughly $2-$4 decrease in cost per package versus utilizing legacy carriers.

This strategy does not demand increased warehouse space (except due to sales growth relating to increased competitiveness), nor significant personnel additions (excepting buyers and factory liaisons), and is benefited massively by economies of scale in product procurement.Logistics services are no different. Replacing existing demand for consumer products already sold by the retailer with private label products is a substitute, not a complement. Now, one can outfit an entire home with Amazon private label products, with a portfolio ranging from clothing, to furniture, to motor oil for your car, and beyond.This strategy has provided immense support for retail margins. When AmazonBasics entered the scene, private label products consisted of high-volume, easily sourced products like iPhone cords and wall chargers. Considering the extreme competitive pressure present in the retail industry, this is no surprise. Core and Tertiary Business Linesīoosting core margins with tertiary business lines has been a worthwhile strategy for Amazon, particularly within their retail unit. In the case of small-parcel logistics, investors and executives may find themselves better served by considering the contrarian viewpoint of Amazon Logistics as a complement rather than a substitute. Considering Amazon’s track record in disrupting and dominating categories ranging from retail to cloud services and beyond, these warnings may seem well-formulated.

As Amazon has deployed significant investment into the logistics space, analysts have repeatedly sounded the alarm with proclamations of peril for the nation’s two legacy carriers, FedEx and UPS.

Amazon idrive