Amazon Continues to Vertically Integrate
Amazon unveiled its first of 40 Prime Air jets in early August as the company follows through with plans announced in June to buildout its own capacity to transport packages. Jeff Bezos, Amazon's CEO, indicated that the company is moving into package delivery as leverage to negotiate better prices with UPS and the U.S. Postal Service while continuing to purchase ever more capacity from those entities.
Amazon revenues have almost tripled during the last 5 years while its workforce grew nearly 8 times larger. The company's growth may only be getting started as it continues to invest heavily in R&D and infrastructure as it expands into new markets in the U.S. and overseas.
Analysts at Deutsche Bank believe Amazon could buildout a global logistics supply chain that will challenge established logistics providers. Such a move would be similar to Amazon's approach to web services where the company shifted from being a large buyer of data center capacity to being one of the largest owners and suppliers of data center capacity.
Why this news is important
Amazon's package transport and delivery suppliers must improve efficiency and drive down prices or Amazon will supplant them as it did to its suppliers of web services.
Links and image credit
Image - Woody's Aeroimages, N1997A Amazon Prime Air Boeing 767-33A, August 5, 2016.
Article - Devin Leonard, Bloomberg Businessweek, "Will Amazon kill FedEx?," August 31, 2016.
