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Comment by andr | Hacker News Reader

I find it very interesting to know what Amazon's competitive advantage would be from having their own logistics business.

1) Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology.

2) What they pay right now to FedEx, UPS, USPS, DHL, OnTrac, etc. should be very close to zero margin, given their position to negotiate those companies against each other in real time. Surely, the margin should be comparable to the cost of capital.

3) Amazon seems to represent less than 10% of packages in the US [1]. Given that they have to cover more or less the same area as other shipping companies have, they will not have the economies of scale of other firms, so their cost per shipment may end up higher.

https://www.quora.com/Shipping-What-percentage-of-UPS-shipme...

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"Amazon seems to represent less than 10% of packages in the US [1]"

No. They represent <10% of revenue for UPS, as the cite says.

That gives you no info about the percent of packages for UPS, despite the quora claim. It's not safe to assume they pay what others pay, and in fact, given the range of volume discounts, it's entirely possible they pay 1/3rd-1/5th what others pay, if not less. (I base this on the fact that the companies i've worked for, which have nowhere near amazon's volume, seem to pay around that). If that was correct, they could represent 5-6% of revenues but 15-25% of volume.

(it also tells you nothing about overall. It could be that combined across 6+ carriers, they represent a large percent of all package volume in the US).

> Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology.

I'm guessing it's the one-hour-delivery thing - last year they started testing one hour delivery for popular products in a couple of pilot cities.[0]

Presumably they can't do one hour delivery with a traditional model of centralised-warehouse -> shipping company -> shipping company's regional hub -> customer; they need an Amazon warehouse near that city, with products dispatched from there to the customer directly, or it takes too much time. Building a warehouse and dispatch operation near every major city won't be cheap.

[0] http://www.bbc.co.uk/newsbeat/article/33332018/amazon-launch...

Related, I don't think certain niches of shipping are truly commoditized.

Have some high impact document that needs to be shipped somewhere within 24 hours and be guaranteed to get there safely? I can't imagine trusting anyone but FedEx for that.

There are two components to Prime Now, at least in NYC.

One is products that seem to be sold from an Amazon controlled or contracted warehouse, and the other are products sold by local businesses (e.g. produce from Westside Market).

You should toss all your preconceived notions. For example, Amazon would not have to cover all areas. It could easily just cover its densest areas and leave the rest to UPS, et al.

I would not underestimate what Amazon could pull off with complete control of shipping & logistics.

Controlling the last mile logistics means that Amazon can sell even more products. They can capture "I need it now" purchases with one-hour delivery, and they can capture grocery purchases because they can make sure the deliveries happen before the goods perish -- enabling them to compete with the likes of Wal-Mart.

Which feeds right into Prime, a subscription service locking the customer into Amazon's closed ecosystem. It makes sense to have full vertical control.

Because Bezos can't get a crappy USPS delivery person off of a shift that affects a bunch of his customers.

But he does get crappy USPS delivery people to my house on Sunday which they never did before.

But left to their own devices they wouldn't even deliver on Saturyday

http://www.federaltimes.com/story/government/management/agen...

> Shipping is the definition of a commoditized business. Unlike AWS, for example, they will not be pioneering a new business model or technology.

Except Amazon has been innovating in the shipping area. Many times Amazon can get stuff to my building faster than I can go out and get it from a store.

Re: #1, Prime Air would certainly change economics of the last mile: http://www.amazon.com/b?node=8037720011

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