Amazon is at it once again. The online behemoth is slashing delivery times for Amazon Prime customers from a standard two-day window to next day. For now, the “upgrade” targets the US market, but Amazon has signaled that it intends to roll out the initiative to other countries. Retailers and parcel delivery companies will now face another game of catch-up. Amazon said it will spend US$800 million to halve delivery times to its US Prime customers. For parcel delivery companies and especially for integrators like FedEx and UPS, this is not good news. Even though e-commerce has seen a boom lately, by Amazon promising next day delivery, last mile delivery costs to the integrators will rise.
On the surface, e-commerce looks appealing but packages have generally higher volume over weight. Also, e-commerce shipments move either one of two ways – mail or consolidations. When shipped through international mail, postal agencies sell low (hoping that increased volumes lower their unit per kg. and delivery costs) only to be hit with higher rates due to volumetric cargo in the mix. Airlines have started to pick and choose when they want to accept e-commerce shipments for transport, avoiding accepting any on Saturdays, for example.
The silver lining for e-commerce is that it is proving to be more recession-proof and can provide for more steady and consistent revenue in a downturn than manufacturing or traditional retail.