Amazon quietly builds its own shipping company
SAN FRANCISCO – While consumers may think of Amazon as primarily an online store, the e-commerce giant is quietly building out what analysts say looks like its own delivery company, one that could ultimately bypass UPS and FedEx.
The Seattle company plans to complete its acquisition of a French parcel delivery company, Colis Privé, within the next three months, the Seattle Times reports. Amazon (AMZN) purchased a 25% stake in the French company in 2014 and is now buying the rest.
Amazon said it doesn't comment on rumors.
The move is a clear indication the company is entering into the European parcel market, said John Haber, CEO of Spend Management Experts, an Atlanta-based supply-chain management consulting firm.
But Amazon isn’t likely to stop there.
“We anticipate they will either make a similar acquisition on the U.S. domestic side (perhaps buying a regional carrier) or continue building out a delivery network internally,” Haber said.
Asked about the news, UPS said it continues to enjoy a good working relationship with Amazon.
The Colis Privé purchase is just the latest in a series of moves Amazon has made over the past two years to take more control over its transportation and shipping costs.
In 2014, Amazon purchased a 4.2% stake in Yodel, a U.K. shipping service.
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In December, Amazon announced it was adding thousands of trailers to its fleet to add supplemental capacity. The trailers are to driven on the trucks of third-party carriers.
That same month came word that Amazon was leasing at least one jet to fly packages daily between its hub in Poland and one in Germany. Amazon is also negotiating with Boeing to lease as many as 20 of its 767s to transport cargo within the United States.
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Last November news surfaced that Amazon appeared to be testing air cargo operations out of Wilmington, Ohio, using leased planes.
FROM LOGISTICS TO SORTING
Since 2014 Amazon has also been building out its ability to sort packages once it has picked and packed them, said Jarrett Streebin, CEO of EasyPost, a shipping and tracking platform for high volume e-commerce companies.
In the past, Amazon might package items for delivery and then have them picked up at the fulfillment center for delivery by UPS, FedEx or the U.S. Postal Service.
Now in many parts of the country, Amazon packages customers’ orders, sorts them by ZIP code and trucks the sorted packages to a nearby U.S. Postal Service facility which takes care of the final leg of the delivery.
What percentage of Amazon’s packages are now handled internally isn’t known. “But the longer they keep them in their network, the cheaper it is for them,” Streebin said.
“Effectively what they’re doing is creating a carrier,” he said.
Overall, Amazon is taking its growing logistics know-how to the next logical step, “which is the transport and delivery of the packages they are picking and packing,” Haber said.
The big question for investors, said Streebin, is whether these moves will end up making investors think twice about Amazon's stock price.
“Why," they might ask, "am I paying tech multiples for this company to be a logistics company?” he said.
Amazon's last 12 months price to earnings is 833 times, versus 33 for FedEx (FDX) and 21 for UPS (UPS).