Question

Refer to the article titled "Amazon is Testing its Own Delivery Service". Do you believe Amazon will be successful? What are the challenges for Amazon? What advantages does Amazon have that traditional shipping companies do not?

Answer 1

SOLUTION:

If Amazon controls their customer's supply chain they could potentially charge less for the items on their platform, which could create a price war with Walmart and thus it could be successful.

Prospects of Amazon getting closer to taking over the entire delivery route hit shares of FedEx (FDX), which dropped 1.65% on Friday. UPS (UPS) stock fell 2.6%.

Challenges:

In a statement to USA TODAY, FedEx said that concerns about possible Amazon expansions demonstrate a lack of basic understanding of the full scale of the global transportation industry. FedEx has said no more than 3% of its business comes from any one customer.

Amazon also has an air freight subsidiary, Amazon Air, based out of the Cincinnati/Northern Kentucky International Airport. Its fleet currently consists of 32 Boeing 767 cargo planes.

ADVANTAGES:

Starting small and only working with its own business customers fits with Amazon’s usual approach of testing on itself and small groups of customers before expanding to larger markets. That’s how it launched its profit-machine AWS cloud service company. Just last week it announced that it would begin grocery deliveries from Whole Foods Markets in four cities to start.

Amazon already ships some of its own goods through its Amazon Logistics services. If realized, this delivery expansion to its third-party sellers would continue the Seattle-headquartered company's disruption of traditional retail and customer relationships.