As if Amazon hasn’t already done enough to keep retailers up at night, the company may be building out its own delivery service, according to Bloomberg. The trial service, called “Seller Flex,” is reportedly designed to increase the number of products available for free Prime two-day delivery and relieve warehouse congestion.
Amazon originally rolled out a pilot in India in 2015, but this year the retailer kicked off a project on the West Coast. A broader rollout is planned for 2018, but it is unclear where Amazon will expand the service to next.
An internal delivery system would certainly give Amazon more control over the last mile of delivery, and would be a blow to FedEx and UPS, which often handle the retailer’s shipments. Additionally, the rollout would bring Amazon massive benefits that other retailers would have to contend with:
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Long-term savings: While Amazon’s shipping and fulfillment costs would increase dramatically in the short-term as it builds up a delivery system, the company could save as much as $1.1 billion annually if it stopped using UPS and FedEx, according to Citigroup analysts. Keeping packages under its own control for longer-distance fulfillment could save Amazon an estimated $3 or more on a typical delivery.
Increased visibility into its merchant partners’ warehousing and delivery operations: Amazon would oversee package pickup from warehouses of third-party merchant partners selling goods on its site,potentially helping the service make full use of their product inventory, storage space and proximity to customers.
A (potentially) more transparent supply chain for consumers: Nearly half (46%) of consumers wish there was more transparency during the delivery process, with the number even higher for younger customers aged 26 to 35 (68%), according to the 2017 Walker Sands Future of Retail study. With all logistics under the Amazon umbrella, rather than individual sellers and third-party delivery services, the e-Commerce giant could share more insight into when and where the product is at any given time.
Continued expansion of Prime services: The breadth of Prime-eligible products could increase Prime’s already booming customer base — as many as 85 million members — and Amazon wouldn’t have to worry about bringing more third-party merchants’ goods into its own fulfillment centers.
