The Rise of Amazon as the Largest Delivery Business in the U.S.

The landscape of the delivery business in the United States has undergone a seismic shift in recent years, with Amazon emerging as the dominant force in the industry. Once viewed as a major customer for UPS and FedEx, Amazon has surpassed both giants in parcel volumes, solidifying its position as the biggest delivery business in the country. In this article, we will explore the factors that have propelled Amazon to the top and examine the implications of its rise for the industry as a whole.

Amazon’s Ascendancy

A decade ago, the idea of Amazon surpassing UPS and FedEx in parcel volumes seemed far-fetched. However, fueled by its outsize growth and strategic shifts at the incumbents, Amazon has managed to disrupt the delivery business landscape. In 2020, Amazon overtook FedEx in parcel volumes, and in 2022, it surpassed UPS. The company’s internal data and industry insiders suggest that Amazon is on track to widen the gap even further in the coming year.

The U.S. Postal Service and Amazon’s Relationship

While Amazon has overtaken UPS and FedEx, the U.S. Postal Service still reigns as the biggest parcel service by volume. It handles hundreds of millions of packages for all three companies. Amazon’s rise to the top has been possible in part due to its collaboration with the postal service. However, Amazon’s figures only include packages that it ships from beginning to end, whereas UPS and FedEx include packages they hand off to the postal service for final delivery.

The Numbers Speak for Themselves

The scale of Amazon’s delivery operation is staggering. Before Thanksgiving in 2023, Amazon had already delivered over 4.8 billion packages in the U.S. alone. Internal projections indicate that the company is set to deliver around 5.9 billion packages by the end of the year, a substantial increase from the 5.2 billion packages shipped in the previous year. These numbers highlight Amazon’s dominance in the delivery business and its ability to handle an enormous volume of packages.

Shifting Strategies and Focused Growth

As Amazon’s share of deliveries has increased, both FedEx and UPS have adjusted their strategies. In recent years, they have emphasized delivering more profitable parcels rather than engaging in a race for volume. FedEx, in particular, decided to part ways with Amazon in 2019. However, Amazon still maintains a delivery partnership with UPS, and its revenue accounts for about 11% of UPS’s total.

The Logistics Milestone and Amazon’s Response

Interestingly, Amazon’s achievement of becoming the biggest delivery business in the U.S. was met with little fanfare from the company itself. Instead of celebrating the milestone, Amazon executives simply high-fived each other and got back to work. This approach is consistent with the company’s focus on continuous improvement and customer satisfaction rather than chest-thumping about its achievements.

Factors Driving Amazon’s Success

Several factors have contributed to Amazon’s rise as the largest delivery business in the U.S. One key element is the company’s relentless investment in its logistics network. Over the years, Amazon has built one of the largest logistics networks in the world, comprising hundreds of warehouses, sorting centers, and other facilities. This expansion has been led by Amazon’s former CEO of consumer, Dave Clark, who played a major role in architecting the company’s logistics network.

Regionalization and Delivery Speed Improvements

To enhance its delivery capabilities, Amazon has regionalized its logistics network, reducing the distance packages travel across the U.S. This regionalization strategy aims to get products to customers faster, improving both customer satisfaction and the company’s profitability. Delivery speed improvements have been a key driver of Amazon’s growth, resulting in increased purchase frequency by its Prime members.

The Franchise Model and Accelerated Deliveries

In 2018, Amazon launched a program that allows entrepreneurs to start their own franchise delivering Amazon packages for as low as $10,000. This program, similar to FedEx’s Ground unit, has attracted around 200,000 drivers in the U.S. These drivers have played a crucial role in Amazon’s ability to rapidly accelerate the number of packages it delivers each day.

Adaptation during the Pandemic

The COVID-19 pandemic presented a pivotal moment for Amazon to expand its e-commerce reach. The company responded by opening hundreds of new warehouses, sorting centers, and other logistics facilities, nearly doubling the size of its network between the start of the pandemic and late 2021.

The Future of Amazon’s Delivery Business

Looking ahead, Amazon shows no signs of slowing down. The company continues to work with other delivery partners and carriers to handle additional capacity. It remains committed to improving its delivery progress, leveraging technologies such as artificial intelligence and robotics to streamline operations and enhance customer experiences.

Implications for the Industry

Amazon’s rise as the largest delivery business in the U.S. has significant implications for the industry. It has forced traditional players like UPS and FedEx to redefine their strategies and focus on delivering more profitable parcels. Additionally, Amazon’s success underscores the importance of continuous innovation, investment in logistics infrastructure, and the ability to adapt to changing market dynamics.

Conclusion

Amazon’s ascent to the top of the delivery business in the U.S. is a testament to its relentless pursuit of customer satisfaction and its ability to disrupt established industries. By building one of the largest logistics networks in the world, leveraging partnerships, and focusing on delivery speed improvements, Amazon has surpassed both UPS and FedEx in parcel volumes. As the company continues to innovate and expand its capabilities, it is poised to shape the future of the delivery industry.

Steve

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