Amazon Moves Suggest Package Delivery Is On Its Mind

With stakes in delivery companies in France and the UK, and airplane leases reportedly under discussion, Amazon appears to be moving toward its own package delivery services. And that's not the only business the company may be looking to disrupt.

Charles Babcock, Editor at Large, Cloud

February 16, 2016

4 Min Read
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Last year marked the first time the public got to see that Amazon wasn't merely one successful business -- online retail -- but two. Specifically, a rapidly expanding and profitable cloud infrastructure service.

It's beginning to look like 2016 will be the year in which we get used to the idea of Amazon as a cluster of related businesses, each successful in its own right and each reinforcing one or more of the others. Are bricks-and-mortar bookstores and package delivery services about to be added to the list?

Bookstores came up when Sandeep Mathrani, CEO of General Growth Properties, a major mall owner, said Feb. 1 that he knew Amazon was in the market for 300 to 400 properties to serve as bookstores.

Two days later, he backed off the statement. His company issued a one-line press release saying his remarks were "not intended to represent Amazon's plans."

Mathrani is head of an S&P 500 company. GGP owns the Glendale Galleria in Los Angeles, Tysons Galleria in Washington, D.C., and Water Tower Place in Chicago. These are places frequented by well-heeled consumers, the kind that become $99-a-year members of Amazon Prime.

Why wouldn't Amazon be planning stores in such locations?

Mathrani was not induced by press or financial analysts to talk about Amazon. He voluntarily brought up Amazon during an earnings call as a prospect that would have the wherewithal to bolster his company's business. And that 300- to 400-store range mentioned is pretty specific, considering the subsequent statement from GCP.

Amazon bookstores could indicate a desire on Amazon's part to get close to consumers, similar to the way Apple does through its Apple stores.

The goal might not be to sell books -- a business that other bricks-and-mortar retailers have found challenging in recent years -- but to use the stores as a way to connect more directly with consumers.

The stores would reportedly be organized with Amazon's consumer electronic devices at their core, with books surrounding that centerpiece. Such stores would give Amazon an opportunity to display its Kindle Fire tablets, Fire Kids Edition, and Fire HD10 high-definition devices. If Amazon could become the personal device supplier to its best customers, that would give it a way of presenting those consumers with more shopping channels and ways to pay, along with delivery options.

Speaking of delivery options, Bloomberg reported Feb. 9 that an internal document leaked from Amazon mapped out how it could create a global delivery network direct from Indian and Chinese factories to its distribution system. Dubbed "Dragon Boat," it would lock up space at competitive rates on container ships and airlines by negotiating, using the growing volume of its business. 

InformationWeek has previously reported that Amazon appears to be experimenting with running its own package delivery airline. The company has leased space in an underutilized airport in Wilmington, Ohio. During its fourth quarter earnings call Q&A, Amazon CFO Brain Olsavsky took pains to say that Amazon was not thinking of going into the package delivery business to compete with its existing partners, UPS, DHL, and FedEx.

But the Seattle Times reported Jan. 11 that Amazon has been frustrated the past two holiday seasons with the inability of the overnight package delivery services to keep up with the traffic that it was engendering. The newspaper reported that Amazon is negotiating to lease 20 767-model cargo jets from Boeing to be operated at the Wilmington facility. It also acquired a 4.2% share of Yodel, a delivery service in the UK, and 25% of French delivery service Colis Prive in 2014.

This quarter, Amazon is scheduled to acquire the remaining 75% of Colis Prive.

[ Want to see the pace of Amazon expansion? Read Amazon Adding Montreal, 4 More Regional Data Centers In 2016. ]

"Some analysts believe Amazon is putting together the pieces across the globe to launch a package-delivery service that will one day compete with UPS, FedEx, and others," according to the Seattle Times.

Bloomberg business editor Brad Stone said in a podcast that Amazon is in a position to extend its e-commerce ordering systems to automate the delivery the process. As practiced by UPS, FedEx, and DHL, it's still a largely paper-driven and human-driven process, while Amazon knows how to automate processes with minimal human intervention.

"It can see what an opportunity the global shipping business is," Stone said. It may be only a matter of time before it updates the shipping industry with a disruptive, highly automated service, he said.

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About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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