Why Doesn't Amazon Build Its Own Shipping Company?

Many people are surprised to learn that Amazon already has its own shipping company, which includes planes, trucks, and even ocean-going ships. The company operates a vast network of delivery trucks, cargo planes, and shipping containers to handle its massive volume of products efficiently. However, Amazon doesn't rely solely on its own fleet and still uses third-party carriers for a reason.

Amazon's Own Shipping Company

Amazon has its own parcel service known as Amazon Logistics. It operates a fleet of delivery trucks numbering around 20,000, a dozen cargo planes, and even shipping containers that go on large ocean-going ships. This network allows Amazon to deliver its products quickly and cost-effectively. However, Amazon has chosen to partner with other third-party carriers as well.

Why Amazon Chooses to Partner with Third-Party Carriers

The primary reason why Amazon partners with third-party carriers is that these companies are often more expert and convenient to operate for long-distance deliveries. Here are some reasons why Amazon relies on third-party carriers:

Specialization: Third-party carriers are often experts in their specific areas of service. For example, some might specialize in international shipping, which can be complex and require specific regulatory adherence. Efficiency: Third-party carriers can handle deliveries that Amazon's own fleet might not reach, especially in densely populated urban areas or remote regions. Cost-Effectiveness: Working with third-party carriers can be more cost-effective in the long run, especially if Amazon is handling a large volume of deliveries.

The Challenge of Building a One-Stop Shipping Company

Starting a parcel service is a complex and capital-intensive venture. Amazon is already present in many countries, and adding another startup to manage would be challenging. Investing heavily in a new company could divert resources away from other growth opportunities, such as expanding their product offerings, marketing innovative new products, or collaborating with other companies.

Furthermore, in countries like India, where there is intense competition from other e-commerce giants like Flipkart, Amazon needs to reinvest heavily to maintain its market share. Opening a new business might hinder their ability to focus on these other critical areas.

Market dynamics and regulatory compliance make it difficult for a single parcel service to have a wide reach. Even established companies with robust networks, like Amazon and Flipkart, still use different delivery companies in different cities. This is because the investments required are substantial, and the market is highly competitive.

Instead of building a separate company, Amazon might be waiting for a carrier with a proven track record and a broad network before considering a potential acquisition. This move would be a strategic win for both parties and align with Amazon's goal of providing efficient, reliable, and cost-effective delivery options.

While Amazon undoubtedly has its own efficient delivery network, leveraging third-party carriers allows the company to scale its operations more effectively and maintain a competitive edge in the rapidly evolving e-commerce landscape.