Amazon.com Inc is experimenting with a new delivery service intended to
make more products available for free two-day delivery and relieve overcrowding
in its warehouses, according to two people familiar with the plan, which will
push the online retailer deeper into functions handled by longtime partners
United Parcel Service Inc and FedEx Corp.
The service began two years ago in India, and Amazon has been slowly
marketing it to US merchants in preparation for a national expansion, said the
people, who asked not to be identified because the US pilot project is confidential.
Amazon is calling the project Seller Flex, one person said. The service began
on a trial basis this year in West Coast states with a broader rollout planned
in 2018, the people said. Amazon declined to comment.
Amazon will oversee pickup of packages from warehouses of third-party
merchants selling goods on Amazon.com and their delivery to customers’ homes,
the people said – work that is now often handled by UPS and FedEx. Amazon could
still use these couriers for delivery, but the company will decide how a
package is sent instead of leaving it up to the seller.
Handling more deliveries itself would give Amazon greater flexibility
and control over the last mile to shoppers’ doorsteps, let it save money
through volume discounts, and help avoid congestion in its own warehouses by
keeping merchandise in the outside sellers’ own facilities.
Last year, Amazon introduced Seller Fulfilled Prime, which lets
merchants who don’t stow items in Amazon warehouses still have their products
listed with the Prime badge, meaning they’ll be delivered within two days. The
merchants had to demonstrate they could meet Amazon’s delivery pledge, and many
used UPS and FedEx for deliveries. The new service gives Amazon control over
those deliveries instead, even if it continues to use third-party couriers.
Amazon has started looking beyond its own warehouse network to give
shoppers quick access to an abundant assortment of goods. Its Fulfillment by
Amazon offering already lets merchants ship goods to Amazon warehouses around
the US, where they can be stored, packed and shipped to customers. That
centralized approach can create logjams, particularly during the busy holiday
shopping season.
Seller Flex would also give Seattle-based Amazon more visibility into
the warehousing and delivery operations of its merchant partners, potentially
helping it make full use of their product inventory, storage space and
proximity to customers while still guaranteeing quick delivery.
The project underscores Amazon’s ambitions to expand its logistics
operations and wean itself off the delivery networks of UPS and FedEx. A rush
of last-minute holiday orders in 2013 forced Amazon to issue refunds to
shoppers who didn’t get gifts in time, highlighting the perils of being overly
dependent on partners for a main part of its business pledge – quick, reliable
delivery. Taking over some responsibility for delivery enables Amazon to
protect that edge as rivals like Wal-Mart Stores Inc. enhance their own
delivery operations.
Amazon is constantly experimenting to shorten delivery times and reduce
costs. It built a network of “sortation centres” around the country, where
packages are sorted by zip code and trucked to post offices, with the US Postal
Service handling the final mile of delivery since it already has workers
bringing mail to every home in the country.
It launched Amazon Flex, which uses independent contractors driving
their own vehicles to deliver packages from Amazon shipping hubs, guided by a
smartphone app. Prime Now offers a limited assortment of products, such as
phone chargers and bottled water, in as little as an hour to shoppers in many
cities.
Many online merchants who sell on Amazon’s
marketplace pay fees to store products in the retail giant’s warehouses,
letting Amazon gather and pack products when orders arrive. But the popularity
of this service strains Amazon’s capacity during the end-of-year holidays.
Online holiday spending in the US will hit US$129bil this year, up 12% from a
year ago, according to Forrester Research Inc. — Bloomberg
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