Ecommerce is drawing up new battle lines – in the transportation sector.
Amazon is aggressively butting in on freight carriers with its own planes, trucks, and delivery infrastructure, and is at the same time aggressively pushing for faster and cheaper service from freight carriers such as FedEx, UPS, and the US Postal Service. And FedEx has had it with Amazon, announcing today that it was dumping Amazon as customer of its FedEx Express division.
“FedEx has made the strategic decision to not renew the FedEx Express U.S. domestic contract with Amazon.com, Inc. as we focus on serving the broader e-commerce market,” it said in a surprise statement. The current contract ends June 30.
Its other units that do business with Amazon and its international services with Amazon are not impacted by this decision, FedEx said.
FedEx is not overly dependent on Amazon – unlike some other freight companies that now have come to grief under Amazon’s boots, including New England Motor Freight, a less-than-truckload carrier that “stunned” the transportation world when it filed for bankruptcy in February.
Interestingly, FedEx chose to address this point explicitly in the statement:
Amazon.com is not FedEx’s largest customer. The percentage of total FedEx revenue attributable to Amazon.com represented less than 1.3 percent of total FedEx revenue for the 12-month period ended December 31, 2018.
Amazon is trying desperately to speed up shipping and keep its shipping costs low. Being so immense, it is able to throw its weight around and negotiate very demanding contracts – that can be too demanding, as New England Motor Freight found out.
NEMF was ranked No. 18 by revenue in the less-than-truckload sector in 2017, with FedEx being ranked No. 1, YRC Worldwide No. 2, and UPS No. 5. When it filed for bankruptcy in February and said that it would go out of business, it blamed a host of reasons.
Industry insiders at the time added a reason: Amazon’s demanding contracts. Amazon accounted for less than 6% of the company’s revenues, according to these estimates, but was low-margin business that required a lot of company resources and was expensive to deal with.
“Multiple industry insiders pointed to NEMF’s over-exposure to a very large online retailer, where volumes may have been high but margins very thin,” Seaport Global Securities analysts wrote in a note, alluding to Amazon. During holiday season, the analyst wrote, “surges in volumes can disrupt current operations, customer service levels, and therefore margins.”
A few weeks after the end of the last holiday period, MEMF was done and threw in the towel.
And so FedEx said it is going to “focus on serving the broader e-commerce market” — more profitable customers that don’t eat up so much of its resources:
There is significant demand and opportunity for growth in e-commerce which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026. FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space. We are excited about the future of e-commerce and our role as a leader in it.
This “opportunity for growth” would be less gigantic shippers that don’t have the margin-crushing power of Amazon.
In addition, there is the issue of growth for FedEx, with regards to Amazon. Amazon is aggressively building up its own delivery capabilities, from cargo planes to last-mile delivery services, and in the process has become a logistics giant in its own right, as it is trying to get control of its shipping costs and move business away from FedEx and others.
So for FedEx, Amazon is no longer a growth opportunity. It’s just a low-margin cost-intensive and perhaps shrinking business.
We can only imagine what happened during the negotiations between Amazon and FedEx as they were trying to renew the contract that will expire on June 30.
Amazon must have tried to cut its cost further and speed up deliveries further, at the expense of FedEx. And FedEx must have done the math that it would be better off chasing after less costly business. Ecommerce is growing in leaps and bounds, powered by countless large and small players – and Amazon is not the only one.
It’s happening one frustrated retail customer at a time. But I doubt there are other options. Read… Here’s How I think E-Commerce Is Wiping Out Brick & Mortar
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Now Amazon returns for smaller items have a option where you just take back the item and the UPS staff will box it for and mail it back to Amazon.
The UPS staff who I interact with regularly are spitting nails. The C-Suite at UPS who agreed to this obviously do not care about how the staff who actually interact with customers feel about this.
I take great pride in my packing and shipping skills, and great respect for anyone who’s moving packages whether UPS, USPS, FedEx, etc. It’s been such a large part of my life since 1997.
Granted, most people are kind of shite at packing; I see their “artistic works” at the post office and it’s not pretty.
Grew up in a family with one member going all over the Pacific, pre-Mao China and all, being a librarian of all things. Maybe she was Conan The Librarian. She was a badass, anyway. And could she ever package a present! And my mom met my dad when my mom was doing that packaging services stores used to do, and packaged something for him.
And come to think of it we grew up in Hawaii doing origami because that’s one of the things you do as a kid in Hawaii, so packing packages, you could say it’s in my blood.
You get a box too big, fill the extra space with air pillows and send it on its way. I learned the art of packaging as well, (at a bookstore) I also know how to take a picture with a film camera and develop the negatives.
+1 :)
Yes, we have a hub in my rural area, and the the go brown folks despise Bezos, now. I’m looking forward to drone delivery; I need the target practice…
Here in ASIA aliexpress ( the amazon of baba ) will not even let you send it back, under about $3 USD value, when you want a return for any reason they just say ‘toss it in trash’ ( once they understand the reason, I think for an unknown defect they may want a return, but a general ‘not like’, or ‘not fit’, they just say ‘trash-it’ )
Above $3, then they want photo, and then issue a return-receipt to print for free-post return shipping
For years amazon has been delay shipping laptops all over the world so the NSA/CIA can deploy devices ( backdoors ), just a few weeks ago Fedex was caught ‘re-routing’ a package belonging to Huawei, me thinks this is more ‘kettle calling pot black’, meaning that Amazon works closely with deep-state-gov, and fedex has not to date. What we have here is Fedex is getting pressure from all sides to be more like UPS or Google/Facebook aka just another arm of socialized-facisist-MA-GOV.
Small companies must always be very wary of becoming dependent on one large customer.
Because once you become dependent, then the customer will quickly put the squeeze on the little guy.
Some business just isn’t worth it!
Interesting article and comments. From my view of the world (and immigrant to this country as an 11 year old and now middle aged)…I have never, repeat NEVER purchased anything from Amazon and, I NEVER will. In fact, I go out of my way to never purchase from Amazon (note that anytime I search for something on line, which isn’t often, they are always positioned first, second and third it seems. . I would rather pay more as Amazon is hurting small business. I would rather pay more and see my neighbor still be in business and have that personal relationship. It is well-documented how badly Amazon treats its employees…simply do a search and you will find out…article after article on the subject. In fact, I’m sure they will find a way to mistreat even the robots one day. Also, anyone that would send pictures of their private parts in a text is not only disgusting, but plain disturbed. This guy (the CEO in case you don’t get my drift) reminds me of the crazy bad guy that wanted to take over the world in the early James Bond movies when I was a kid with Sean Connery…the crazy bald guy that would pet the white Persian cat with a diamond necklace. This is gut check time in America and I urge you all to consider doing the same!!! In fact, it would not hurt for us all to cut back our consumption in general. Wants are now confused with needs. America, you and your loved ones will be better for it. No ands, ifs, or buts about it.
Trinacria I do the same. I buy all my books from Barnes and Noble just to keep come competitive force.
Now owned by Elliott Management (Paul Singer). I agree with your sentiment but now I think books are to be bought from one billionaire or the other . . .
such good comments! On the book front, my wife and I buy (in Portland, OR) from Wallace books – owned by a local person and run out of a small bungalow house that is about 100 years old. They also deal on line etc. Prices are no more than anyone else. but is it’s not just books; Amazon is into everything. They are not good for humanity. Anyone with half the brain that God gave a goose also realizes that this is an anti trust situation. Hopefully, someone will get the pelotas to go after them and some of the other abusive companies hiding behind technology.
Really good comment! However certain worshipers of the religion of Darwinist Capitalism believe that crushing everyone is their “god given” duty, regardless of the cost. Make no mistake, this IS a religion! The previous misogynist boss of disgusting uber is also exactly the same. The true cost of shipping must be properly charged in all this “online shopping” hysteria. Good on FedEx for firing the first shot over the bow of the enemy! Only when freight is properly charged (staffing, subcontractors, gig-workers, fuel, environment etc) does the High Street shopping strip have any chance. I hope other freight companies come to realize that certain customers can be toxic, and are only Darwinistic predators best avoided (or charged a hefty premium). A previous boss said to me that sometimes it is best to just write a (proverbial) cheque to a bad customer and walk away. I think FedEx must have heard him.
Trinacria -I do the same. I buy all my books from Barnes and Noble just to keep come competitive force.
I find Amazon to now always to have higher prices than if I spent the time and search around.
Sometimes by very large margins. For example, I purchased a “GO” electric lawnmower from Home Depot for about $125 less.
Amazon is now ALL about convenience. People are lazy and would rather do a “one click” and pay more money than to spend some time and save some money.
Kinda like the buying a package boiled egg at the grocery store at 5x the cost of a raw egg.
No kiddin’. I love my Iwatani butane stove but to find the same stove at Mitsuwa Marketplace for $10 cheaper is a bit of a let-down.
Some things, though, are a royal pain in the ass to obtain locally and amazon is both easier and cheaper.
As for eggs I’ve kept chickens so I can’t bring myself to buy the cheap ones. I buy the ones from the places where the hens all have spa memberships or something.
I buy boiled eggs and canned whole chicken from Amazon. Can’t beat it.
“I find Amazon to now always to have higher prices than if I spent the time and search around.”
Part of that is due to their “free” postage. TANSTAAFL.
Part of it is convenience, but part of it is also people might not know where to look any more. The problem is going to balance one of time spent and amount of cash needed.
Also have to sometimes factor in the extra shipping costs. Kind of annoying.
As much as I hate to say it, I do wish Walmart would get its act together.
About that butane stove (or other kitchen items), you can and should check out Webstaurantstore.com. (I am not a paid schilling for them.) I find they have some of the same items for a few dollars cheaper than Amazon.
I buy shoes from Amazon all the time in 3 sets at a time. Check sizes, colors and ship back the rest, frack you Bozo.
I buy all my books from amazon and have a kindle which has more books in it than your local library at a fraction of the cost. And I love it.
You guys are luddites and social justice warriors. Amazon is a great company and I have been a customer since 1999.
If you like paying 50% more for your books, by all means do, and if you don’t like working for them, or feel exploited, no one is forcing you to stay.
I question your motivations that you are worried about the neighbors business to whom you probably haven’t talked to in years and would be watching with envy from the sides if his businesses was truly booming and has a better car than yours…
Do you remember that episode of The Simpsons where Grandpa Abe shows Homer his website ‘OldCoot.com’ where he explains ‘Why Today Stinks’?
Certain people are just like Granda Abe, and we love them just like we love Grandpa Abe. :-)
You question the Commenter’s motivation because the Commenter probably doesn’t talk to the neighbors and would be jealous anyway if the neighbors had successful small businesses. I do not understand your use of motivation in this context. I certainly can’t understand the motivation for paying more for goods to support neighborhood small businesses with the apparent goal of making oneself envious. What exactly is the Commenter’s motivation since you brought it into question?
How could a electronic book purchased from Amazon possibly be cheaper than a book from local library? Even the books local libraries sell during their annual or semi-annual book sales are cheaper than any kindle book from Amazon (my local library sells them for $0.25)
Library Cards are free at every Library I’ve ever patronized, and all you need is a library card to get a book from them.
If reading books for free (or $0.25) makes someone a Luddite, then I’m all in :)
Memento mori: If you want to buy your books from Amazon, last time I checked this was a free country, at least for now. But to call people names and make assumptions because you don’t agree with them is simply not necessary. Also, your entire argument is illogical.
FYI, I find the SJW movement misguided and not acceptable to me. So your statement about that is also off base and unnecessary. I simply will not patronize a company that I believe employs unethical practices and treats their employees as expendable. Technology is great when ethically employed. Yes, I would rather pay more and support small business. Small business is the backbone of this country. As homework, I highly recommend you spend 3 minutes and go to YouTube and look up a cartoon video by Jib Jab called “Big Boxmart”…pay attention to how it ends….”we used to be your customers now we’re your employees”….and “you’ll find me scrubbing toilets till they put me in the grave”…quite sobering. I am 64 years old, came here as an immigrant from Italy at age 11, worked hard and I’m blessed to have enough funds to last me THREE lifetimes. So, it’s not a question of money, it a question of ethics and morality….you know, those old fashioned notions that have gone out of style with the help of the Amazons of the world… but obviously beyond the ethical grasp of some.
You guys are luddites and social justice warriors.
Is that now a bad thing?
I can afford to pay 50% more for everything, including books, because:
I don’t have to work for Amazon pay and working conditions.
I don’t need 95-99% of the “straight from resource to landfill” garbage that those “great companies” want me to need so I don’t waste any time on acquiring it and disposing of it.
It has been my experience that those people who see “price” or “costs” as a special quality in itself are not beneficial for anyone to associate with. They are a fickle, envious lot and never up for much because they are always figuring “what in it for them” when they are not grudging over “how they are/were/will be getting screwed” instead of enjoying that there is so much choice and opportunity right now and then taking some of it.
I don’t care about my neighbours business and the quality of their cars. I care about what I control: My own business and my own car, which I find is a much more effective use of ones very limited time.
I do use AWS though, so it could be I am a hypocrite or maybe I am leaching Amazons resources via their subsidised computing platform and fighting the oppressor?
One more thought: did you ever consider that Amazon through its CEO who bought the Washington Post, uses some of the profits that you help provide to lobby against you and many others…a guy like that is quite adept at playing the two ends against the middle. The best thing we can do is choose not to allocate our dollars to him and companies like that who want to thwart the will of the people and certainly don’t work toward the true common good….and I don’t mean socialistic SJW garbage.
Sometimes I would like to give different companies my business but when the cost is exorbitant i can not seem to do it ! I had a plastic handle break off
My dryer and wanted to order it from whirlpool but they wanted $35 for it and that’s without shipping . I ended up ordering one on Amazon with shipping for $8 and it seems sturdier and stronger than the original ! I bet if whirlpool would charge a reasonable price for a handle of decent quality they could do a good parts business but they are killing themselves by excessively pricing there parts !
Too many small companies have folded because of their dependence on large corporations that ultimately squeezed them out, often doing the job themselves and abandoning the companies they once used.
The phrase about too many eggs in one basket comes to mind. Doing $10M in business while $9M is from one company isn’t exactly a good business model, especially in todays environment.
The dependence on one big customer has crashed many little 2 and 3 man coder shops here in Seattle (one guess as to who the Big Customer is). Every so often from 1995 onward, the Big Customer decides it’s going to pay on 60 or 90 days, or that it’s unilaterally going to give itself a 10% vendor discount. I talked to many people here who were living well until Dot Com One and the Big Customer decided to squeeze them, because they could.
I still work as a vendor for a couple companies who rely on the Big Customer, and any hint of the slightest shiver causes panic. I just save my money and wonder why people didn’t figure out this would happen with multiple teaching moments over the last 25 years.
Maybe it will one day be the US population that gets squeezed in the same way.
In my business experience(s) I would rather have had 50 small customers than 5 small and 1 very large one. You are always battling $$$$. Can’t afford to loose that one large one; whereas losing one small one “ain’t no big deal!”.
The Walmart plan in action. Many stories, all basically the same. Capture a high volume contract as a supplier. Ramp up your business to fill it, adding expenses like capital, employees. Renewal time, Walmart demands 6% reduction, regardless of raw material costs, energy costs, everything. Lose the contract, and any reputation for quality your product ever had because they demand price over all else. The Snapper lawn equipment story was a company who said no.
FedEx. P/E=11.6 Div= 1.7%
Amazon. P/E=75.3 Div=N/A
Amazon can tick off and destroy it suppliers, vendors and delivery partners as long as the cheap and easy money keep flowing.
Amazon buying tactic.
After many online searches, research, and several attempts to buy local, a few years ago I replaced some heavy heavy shop power tools. (Dust extractor and planer). Shipping was going to be seveal hundred dollars, but with Amazon prime it was ‘free’. So, I signed up for Free, paid the $75 for the year, and after the tools arrived and they had do defects, I canceled Prime as there was no penalty to do so.
I guess they expect people will be too lazy to cancel, or will enjoy the service and just keep it up.
Confession: (I have done this twice). Maybe they closed this loophole by now, but it worked for me. As a rule, we stay away from Amazon and resent their place on the ‘search’ results.
The game of squeezing your suppliers into bankruptcy isn’t a long term success strategy. The extra few bucks you extract are lost when that supplier can’t meet your needs any more, and you have to scramble to find new suppliers.
For the suppliers, better to let your competitors have the high volume, high maintenance, low margin business. They’ll go bankrupt, and you can then pick up their customers at a significant profit.
I dread having Fedex be the carrier delivering my package. It’s almost a lose lose situation with them. They either bring it to the door broken or they hand it off to the post office, who loses it or delivers it to the wrong house. They probably forced Amazon into the delivery business because of all the losses and complaints.
Ah, the problem with trends using small statistical samples. I have never had a single problem with FedEx delivery and I get one several days a week.
It may be the people they employ in my area are not that great. I have three broken tables in my garage delivered by them. I never buy from Wayfair because they use them and I can’t get anything delivered in one piece.
Wayfair is horrible. Most of the companies they buy from don’t package their furniture properly. Same with Overstock.
The furniture comes all the way fromAsia thrown into a cardboard box without padding. Not the Fedex or UPS person’s fault. Also, now furniture (like end tables) have cardboard, not wood backing. If you throw that in a box, it is bound to get broken. I replaced the backing on many new bookcases and end tables with wood recently.
Even their light fixtures are packaged poorly. I prefer items made from artisans and craftspeople from Etsy.
My experience with Wayfair has been good. Just be prepared for “minor assembly required.” Make sure you know how to use a power screwdriver. And know how to do the occasional minor carpentry work when not all the 50 boards they ship fit together into that beautiful huge armoire :-]
IdahoPotato – Since I’m under, effectively, a non-compete clause on Ebay, I might tip a toe into the digital waters and try Etsy. It means I’ll have to learn to use PayPal, but I was looking at the situation for a sort of artist’s studio right downtown today.
I have sign painting in mind because I’ve done several signs over the years, and it was one way you could always scare up a few bucks in the Starving Seventies.
I’ll keep saying it: An American working in their garage can, as a rule, make a better product than one shipped over from China, cheaper. I’m talking everyday things like kitchen utensils, brooms, loafers, tons of things that are really expensive now and not that hard to make.
Agree that for me, Wayfair is horrible. Tried a couple of shipments, always something broken. My issue is that they ship to me someone’s returns which have not been re-boxed properly. No quality control for this outfit, at least to our family.
Exactly my experience too, Petunia!
One time FedEx Overnight letter service left a title to an automobile we had bought n a mailbox two miles away. Fortunately, it’s a small community and the box-holder knows us and completed the delivery.
I must have gotten help from Amazon customer service at least two dozen times to get delivery of Amazon Prime orders at all, forget about on time.
It wouldn’t surprise me if FedEx quit Amazon knowing they were about to get fired
Parcel Force in the UK used to lose and/or damage 40% of the paintings and prints we sent out from out gallery, however well-packaged (I got very good at that ), so that we ended up delivering by hand if at all possible. Well known as’ Parcel Farce’.
Congrats to FedEx. An excellent tactical decision. There is a general corporate strategy I’ve read about that says figure out who your highest and lowest revenue customers are. Then focus on giving excellent service to your high revenue customers, and fire the low revenue customers, who are often the ones making the greatest demands. Looks like FedEx read the same article I did, although it must be ten years old.
Amazon is most certainly getting into the *last-mile* delivery business with its Amazon Delivery Services Partner* play, creating its own franchise-like partners and pushing out both liability and costs. Major risk for these DSPs is they have only one client feeding them business: Amazon.
I suspect they’ll start in some place like Kansas and not some high population area for reasons of safety:
Here’s Amazon’s new transforming Prime Air delivery drone
The new drone can fly vertically, like a helicopter, and in a new, aerodynamic airplane mode
By James Vincent and Chaim Gartenberg – Jun 5, 2019
https://www.theverge.com/2019/6/5/18654044/amazon-prime-air-delivery-drone-new-design-safety-transforming-flight-video
Amazon has unveiled the latest version of its Prime Air delivery drone, a hybrid aircraft that’s capable of vertical takeoff and landing as well as sustained forward flight. The company says it wants to launch a delivery service using the drone in “the coming months,” but has not said where this might take place or how many customers it might cover.
Amazon claims its goal for the finished Prime Air service is create “fully electric drones that can fly up to 15 miles and deliver packages under five pounds to customers in less than 30 minutes.” This may sound like a small payload, but Amazon says 75 to 90 percent of purchased items are under that weight limit.
Amazon will soon open up their delivery
network to anyone, becoming a direct
competitor to FedEx instead on a customer. You can be sure Amazon has
analyzed delivery data from all its delivery
providers and will only use them when
Amazon can’t make a profit on delivery.
FedEx has draw. A line in the sand but is
it too late ?
If Amazon is cheaper than Fedex for some deliveries why shouldn’t Fedex take advantage of that? They have computers and can do the same analysis. It’s a 2way streeet.
Why do companies sign contracts with Amazon that have thin margins? Greed. No sympathy here. Like the company that went bankrupt making cover glass for Iphones. Remember “Put on your big-boy pants”? Emotional manipulation. Dumb!
Amazon’s metastasis into every segment of every market is yet another argument for that DOJ Antitrust action…
On the subject of Amazon and monopoly misbehavior:
Both Google and Amazon have let their systems get ruined by inferior search results.
Amazon searches yield so many “sponsored”, substandard and/or scam products that I have to search a lot harder to get what I really want. The ratings are clearly being gamed too. It has become a lot harder to find quality items. This costs people time and money and so they find better ways to spend their money. I think we’ve hit Peak Amazon.
Similarly, Google searches for IT-related problems now yield a lot of “leading” results which are poorly-written advertisements for low-quality app-based solutions to problems that are much better solved in other ways. No way these are the best search results for these queries. I have nothing against the good people of India, whose linguistic style is present in many of these pages, but someone’s got scams going. Again, when you cost your users time and money, they find better alternatives: Peak Google.
Fortunately these monopolists are not so big that they’ve eliminated all the alternatives!
I don’t buy a lot from Amazon but I too have reached peak Amazon. Two purchases I made which were fulfilled by third party sellers soured me on the company. With the first item I finally got a refund but it took way too many phone calls to do it. With the second item, a Xmas gift for my son, an electronic widget that broke the third time it was used, and it turns out has no warranty, and it’s was past return window.
Amazon has risked its reputation by allowing third party sellers and they are losing customer loyalty.
“Customer loyalty “?!
Great chuckle !
Customers are only after cheap products, but cheap isn’t cheap always!
So I hope you retract your comment of being a loyal customer to Amazon ( a great shame and a blight on the world economy that will drive many a profitable business to the wall ) before ( loyal customers)! Like yourself DISCOVER the reality of how business works.
That said, I’d like to emphasize here that the Fundamentals of running a business [ have Not and will Not change] No matter how innovative wordings dingbats of the Wall Street goes to glamorize these Tech Bull- Shit artists!
In a sound business you add the cost of your ( Material + Time + Labor) to a reasonable amount of profit that keeps your business growing and customers happy to ( reuse your service or products again) Not only that but preferably recommend it to new users.
In saying so the likes of Amazon, FB, Tesla, Übers and Lyft have No profitable business model.
It’s heartening to read comments like Trinacria’s who by active thought process or by gut instinct reached a decision Not to use Amazon Crappy services & products.
It is also heartening to read ( Wisdom seeker’s) analysis on how companies like Google and Amazon endless quest for dominance turns their user away gradually and turn them to giant skeletons of failed economic experiments.
The average punter( yes that small little woman or man ) that you’re trodding on Mr & Mrs behemoth Tech Company ( another misnomer) are going to be the ones that kills you off.
Wafer thin margins are Not long lasting to protect you from the cold winter that is as Surely coming as the Day and night take turns.
+1
FB not a profitable business model? Really?
Tesla is a luxury car maker like BMW, Audi, Lexus or Mercedes. Its only differential is batteries (and being the sole American) but by 2040 the others will also only sell electric cars.
Amazon is trying to be the only/everything store. Don’t know if that will in the end be successful but parts of their company is (highly) profitable (books/cloud). Personally i think they steer their numbers to the zero and is their “same store” healthy
Uber/Lyft have the same business model for which i don’t see a billion dollar business case
“Both Google and Amazon have let their systems get ruined by inferior search results.” Boy, have you got that right! I’ll type a name I’ve seen in a news article or something into Google, and among the images they pull up are invariably a number of pornographic pictures! (This is even true for well known names). (at least this doesn’t happen at Amazon).
“invariably a number of pornographic pictures!”
Turn on SafeSearch in settings.
Delete your browsing history in your browser :-]
Commenting for a friend…..
LOL
Do you happen to have a teenager in the house? Google will associate searches from different devices at the same location and then assume that they have similar interests.
For example, I get a lot of job-sites and career-advice links coming up when searching from work …. which correlates somewhat with my insider knowledge on how this TBTF-project here is really going.
When a lot of Google adds for ‘office leases’ and suchlike comes up, it’s time to polish up the CV.
I have one very accurate example. Someone asked me for help creating a resume. So I sat down with the person at the pc and googled “resume” to explain some formats. We were both stunned to discover that the pages of search results were app downloads that required credit card information to view or manipulate the documents. In many cases after creating user name and passwords along with vast amounts of personal information. Very disturbing.
I think where things are heading with last mile delivery is combining the gig occupations of Uber/Lift Driver and Amazon delivery in to one. Soon you will hail an Uber and when you climb in you will find you are sharing the space with bags of cat litter and bundles of toilet paper. On the way to your destination the driver will make a couple of stops to leave packages along the way.
Yeah and if the car is driverless, you’ll have to tote the bags inside homes so that the ride will continue.
You guys have got me screamin’ over here!
That’s great, Brant! (My driverless car drove me to drink)
That would in fact be a return to the old-fashioned English ‘village carrier’, who would give you a lift as well as carry and deliver stuff. Together with illegal poached hares, etc.
It seems to be a corporate American trend pioneered by Walmart which bankrupted many of its suppliers forcing it to abandon its made in USA marketing for made in China. Uber and Lyft lose a little on each ride which is subsidized by its investors. In a similar fashion Amazon appears set to combine the approaches by forcing their delivery agents to lose a little on each shipment and then go bankrupt. Tesla also seems to be unable to break the paradigm, being subsidized by is investors.
Cheap money seems to be all that is propping them up (with the possible exception of Walmart).
Id like to add…don’t leave the consumer out of the equation. It is we who want cheap.
Cough, pioneered by Sears Roebuck. Searsed was a verb in the 1960s.
Amazon’s AWS is profitable and is pretty much subsidizing its retail operations, which are losing money.
Amazon and Wal-Mart are viable businesses, but it seems being a supplier or contractor is not viable.
Uber and Tesla, by contrast, appear to be fundamentally unprofitable.
I think consumers are ultimately the arbiter and the key to their own downfall. If you think about Bezos basic message and the marketing behind it, it makes perfect sense. Customers are #1, give them what they want. Since the consumer can’t act as a collective, as long as enough individuals are satisfied, then Amazon survives. In the process, it has branched out to other markets, and managed to gathered sufficient market power to become virtually untouchable.
Amazon literally did this by leveraging other people’s money until it became successful and then it pleased the consumers enough to have been given its power. So naturally, Bezos think that he deserves it. What’s amazing to me is how they managed to turn Amazon from a shopping option to the go to location for literally everything. Now people are becoming trained from birth to use only Amazon, because they don’t know much else.
This strategem has been applied to markets where it doesn’t make sense, like Uber/Lyft. I just read this article below, and it hashes out many of the same things already known. Inherently, you have a subsidized self destructive business model that is is run on other people’s money. (warning: long read)
https://americanaffairsjournal.org/2019/05/ubers-path-of-destruction/
I think about this and the longer term negative effect, but in the end, the decision is simple. I may as well take advantage of this situation while someone else is subsidizing my ride, my stuff, etc. Yes, it is self destructive, but we’re on that path any way. There is no convincing people otherwise.
The pendulum has swung too far in one direction, but let’s face it, even knowing that companies such as Uber and Lyft are ultimately worthless, one can’t deny the convenience offered by other people’s (investors) money. If and when investors finally lose patience with them, then there will be someone else. Until at some point, the government steps in, and starts regulating stuff. I start to see things like this happening now, but my guess is if the pendulum starts to swing, it will go too far the other way.
Yeah, since it was reported that Amazon will drop it’s small ‘Mom and Pop’ suppliers a few weeks ago, I won’t be using Amazon either. Who are these corporations going to sell to after smashing down everything around them?
I expect that in the near future the product selection on Amazon will come to resemble that at the old department stores in the Soviet Union. There will be no different retail marketing chains to differentiate products so they will become nearly identical. Want a T-shirt on Amazon you can choose from Amazon basic or Amazon deluxe in one of the three primary colors plus white. Our Main Stream Media ( except Wolfstreet of course) has come to resemble the old Soviet newspaper “Pravda” so it only makes sense that our product choices will come to resemble those of a resident of 1982 Moscow. But instead of the party deciding what we get to wear and use it will be Jeff Bezos.
WolfStreet, like many smaller internet news sources, are almost by definition not Main Stream Media (aka Lame Stream Media).
Will we have t stand in lines or have huge wait times for ordering ?
Ah, the price of progress.
The Amazon “mom & pop” suppliers in the UK tend to be chinese suppliers despite the “mom & pop” English company names.
I find it pays to spend a little more time whilst browsing to go to the supplier details page where you will find that “English Country Garden Crafts” is really a remote address in Guandong province in China. These chinese companies seem to avoid paying VAT (sales tax) in the UK which is why their goods are cheaper than local suppliers.
Until they went out of business, I used to shop at Syms a lot(“An educated customer is our best customer”), and in buying a cashmere sweater looked for a Made in Italy label because their craftsmanship is legendary- but noticed the quality was not what I expected. It turns out that Chinese companies, staffing their factories with Chinese workers, yet are now cranking out “Made in Italy” stuff.
As for English Country, I visited Parliament during a trip to London years ago- they were debating a law that would allow farmers to sell other than local produce at roadside stands: ditto.
I suspect Amazon’s definition of ‘Mom and Pop’ is a tiny bit different from yours. Basically here we are talking about vendors (not third party sellers) between $5 and $10 million in sales per year. ;-)
And remember all those articles Wolf has written about warehouses in the US becoming more and more expensive as any retailer you can think of goes online and needs the room? Amazon is all about low prices, even when buying/renting warehouses, so they are trying to cut vendors to reduce storage space.
And if they can manage to push those vendors into becoming third party sellers (3P), that’s even better: if 3P choose to use the Fulfillment by Amazon (FBA) option they get to pay Amazon some juicy fees, including a monthly rent for any warehouse space their good take up.
Do you understand where this is heading? ;-)
yeah… my stuff subsidzied by someone else. Even though in the long run, it leads to ruin.
Actually it leads to one of Amazon’s semi-regular “grab vendors by the ankles and shake them for pennies” moments, only this time they are taking aim at the middle layer between the largest 3P and big vendors, those directly selling them over $10 million/year worth of goods.
Amazon usually does this when some higher up notices they get regularly beaten in the pricing war in some category and wants to set the record straight: expect Amazon prices throughout the whole spectrum to get remarkably close to similar eBay prices over the next three months, in time for the Fall shopping season. ;-)
Actually, Amazon did not “drop” its small suppliers. It effectively removed part of the service it had been offering: buying and storing their goods for resale. It is moving towards direct shipment from the small supplier to the customer with some guarantees (sort of like insurance) for each.
In effect, Amazon becomes a broker of a sale and insurance and it remains to be seen whether small businesses will pay a fee for this service.
Is it hubris (which eventually overtakes all human institutions) that Bezos thinks Amazon is so powerful that these businesses will not find a way to sell online without Amazon?
Time will tell.
Can Amazon really implement a cheaper logistic unit? We will see. Amazon is so big it is susceptible to cross subsidization which makes profit management harder.
One of the things not being reported wolf. The feds have changed so many rules for freight carriers. A small one in Indiana with 46 truck drivers is shutting down in a few weeks after its insurance more than doubled thanks to New Fed rules. Site freight waves has it yesterday . Low freight rates is also squeezing these trucking companies.
Yes, big problem. I touched upon the plight of the smaller truckers that are dependent on spot rates in my last article on trucking, about halfway down, citing the CEO of Freight Waves…
https://wolfstreet.com/2019/06/05/what-collapsing-class-8-truck-orders-down-71-from-year-ago-say-about-the-u-turn-in-trucking/
Fed X also has a little problem in ccp china that could get nasty and take a large piece of market share from them.
Does Bezos know something, Fed X currently don’t?
Matt & Wolf – Fascinating! The US Postal Service has just instituted a new service, Parcel Select. It has the same delivery times at Priority Mail, but appears to be ground transportation only. This only came out maybe a week ago.
So I wonder if they’ve decided to go with railroads or trucking co’s? This is big and Wolf being a transportation guy, might be interesting to research.
AMZN became a vertical co, piling debt .
AMZN invest in shipping, but the global trade is shrinking
Tariff on China & Mexico, border crossings bottleneck, will slow
the flow of goods. The west coast will be hit the most.
The DJT made a lower high and on the verge of lurching down
below the support line.
The DJT is notoriously volatile and AMZN is deep in.
Amazon of course is one of the great American success stories of the century, and over the years when the brilliant anaylsts on the street were condemning the stock with negative commentary for amzn’s zero quarterly dividends as Bezos reinvested everything back into his business, the stock continued higher inexorably. Sears did this a hundred years ago with the postal service and now Amazon… PJS
I routinely see Alibaba Counterfit stories but can count on 1 hand how many i have read about amazon
That said, ask around! How many upwardly mobile / intelligent mothers feel confident buying baby food etc on Amazon? THEY KNOW!
Eventually people will come to realize there is a ton of counterfit stuff on amazon and the trend will reverse. Would love to hear comments
I’m a doctor. I fed both of my children formula purchased from Amazon. I had no problem with it since, you know, Amazon doesn’t make baby formula, and I’m actually trusting Mead-Johnson or Nestle just like if I was shopping in a grocery store.
The incident where baby formula was adulterated with melamine happened in China.
“Eventually people will come to realize there is a ton of counterfit stuff on amazon and the trend will reverse.”
In my experience just with rechargeable lithium-based batteries, but that is a HUGE problem in general in that category. I have the ability to capacity test cells and I have NEVER received one from ANY mail order source that was more than 50% of its claimed capacity. You can be sure that I post my one star reviews on Amazon detailing that. Unethical scumbags…
“lithium-based” RECHARGEABLE batteries.
I had to replace a car light last week. Got one light from O’Reilly for $7, as flimsy as they come. Got a pair from Amazon for $10, much more solidly built. The reviews make the shopping experience much more fruitful.
Amazon has wider choice and a better feedback system. As simple as that.
i agree with you about counterfeit stuff on amazon and the 3rd party/fulfillment scam. and regarding expiration dates on formula for babies, i wouldn’t be surprised as i was researching reviews on sunscreen for James and one of the RECENT questions asked by a customer was: “why are they selling sunscreen stamped with an 2013 expiration date?” and two answers lied and said, “that’s the date it was MANUFACTURED.”
i’ve also wanted to buy name brand rotary blades on amazon and the reviews said they arrived without logos or appeared to be counterfeit logos and the blades skipped.
some thought they were generic Chinese blades, others thought the company was using Chinese manufacturers over Japan for blades. (need i say more on Japan and blades?)
i do believe the race to the bottom does also have reliable companies themselves also undermining their own reputations by also cutting costs and putting inferior cheap promotional versions out there.
but yes… i no longer trust i’m getting clean “original” versions on amazon and i agree that i’m shocked i’m not hearing anything about it because even James is getting supposedly stock bicycle parts directly from amazon in generic packaging.
i think all the returns from ecommerce is also flooding and re-flooding the same marketplaces (like ebay, too). for supposedly new name-brand things you get damaged items the seller will claim were recently dinged and not sent out that way.
it’s fascinating how the race to the bottom is making peak everything happen so FAST with a certain type of short term thinking like folks here talk about with suppliers.
i’m buying retail fabric from Taiwan for my one-of-a-kind different designed “kitty suit” pants i’ll be (reluctantly) selling online til i can find a network of brick and mortar stores to keep ’em in. and this fabric store accidentally shipped me 20 yards of some rare American fabric left from a company that had long shut down and shipped its looms to China, fabric that was also severely damaged in the middle with warping, runs, from a big hole being serged back up and rolled inside.
and she apologized profusely and refunded me all my money when i was upset by her original tiny dismissive solution and asked if she’d ameliorated the situation to my satisfaction and i said, “oh, no… i don’t want anything for FREE from you because i need you to do well and stay in business. i can’t find this level of quality thick and resilient comfortable soft fabric anywhere else and i NEED you to exist and thrive in this era of dying fabric stores, so that i may also thrive and exist in this era of crappy stuff.”
i’m trying to play a long game and stand still and rooted in all this mess. return to archaic eternal principles. the kind about not pissing and crapping in your own drinking water or farting up and smoking up your own breathing air and everyone else’s.
(p.s. the fabric store is in OREGON, but they sell me higher quality fabric made in Taiwan as most other fabric stores are selling less resilient, rougher thinner stuff made in China.)
I heard Amazon starts the drone delivery in two months. We’ll see how that goes. I can’t imagine it’s energy efficient to send out drones delivering one package per trip. Also, you have the problem of packages sitting in the middle of the front yard, like ripe red apples.
Down South I imagine a few will get shot down.
Up North they will be shot down as well.
In the boonies they’ll still use the Postal Services, which is in effect a parisitical business practice. Lots of parasites in the Amazon……a real jungle out there. :-)
I have been working as an Amazon delivery driver for over 2 months.
Today, I completed 162 stops and delivered 217 packages.
The job is very physically demanding and they go through a lot of people.
The vast majority of the customers I encounter love the service and are amazed when they receive their package the next day.
2nd day or next day delivery via Fedex/UPS is costly, Amazon delivery is basically free.
Walmart is suggesting they will start offering a similar service.
To do so competitively, they will need to adopt the same/similar strategy that Amazon is using.(IMO)
Demand for this service will continue to rapidly grow.
Fedex is understating the impact this will have on their current/future top and bottom numbers.
Unless market conditions change, Amazon can continue to focus on scalability with the hope that profitability will soon follow.
If you were working a 12 hour shift without breaks, your 162 stops would average 4.444 MINUTES per stop. You would not be stopping for a coffee break because you don’t have time for a toilet break!!
You would of course be very fit after a couple of weeks having spent most of your 12 hour shift running backwards and forwards to your vehicle carrying parcels. Sometime after getting fit, you will probably end up with a heart attack or a hernia at the very least.
Your customers might spare a thought for “that nice young man who delivered our parcels last week!!” which is more than your employer probably will.
The shifts are 10 hours each which include driving time.
If it takes me 45 minutes to arrive at my first location including a 1/2 hour lunch break, I will spend 8 hours delivery packages.
I am actually a slow delivery driver but improving.
The best drivers average closer to 2 minutes per stop.
George W
“Demand for this service will continue to rapidly grow”
Please Stop spouting this NONSENSE!
There’s No “Demand for this service will continue to rapidly grow “,
BUT
THERE IS ALWAYS A DEMAND FOR FREE STUFF.
and believe you me, you all will pay for it ( Through the Nose) I might add.
Next day delivery is now the new standard.
Customers will demand nothing less.
Walmart get’s it, as they can’t afford to pretend away reality as simple nonsense.
I’d much, much, rather pick up my packages from somewhere on the way to work at my time & convenience than have them dumped on my porch to be stolen or (ugh!) having to actually sign for them personally at the door for “next day delivery”.
UPS are terrible for the “signature cycle of DooM” here. The are tooled for business delivery so the package will get there in 2 days and then it can take 5-6 days to “sync up” with the bl**dy delivery round because their logistics centre is somewhere way out in the sticks; I am NOT driving all that way out there and the UPS drive demands a signature :).
I and my wife worked for FedEx at the HQ in Memphis for about a decade. While it had a great corporate culture at that time, one of the things I have learned from them was how to not fire a customer.
I think having good competition is fantastic for the economy. Personally, I like UPS as I think they are better engineered for reliability and dependability. Because FedEx ground has misdelivered 3 shipments in a week, I’ve asked Amazon to not use FedEx for my orders.
In the end of the day the customer is King.
Let’s see who’ll do better for the last mile.
I believe the Amazon logistics model is amazing.
FedEx is probably better only for hauling containers. I am guessing that FedEx is partnering with PE firms to bolster local warehousing to improve their logistics so they were emboldened to fire Amazon. Otherwise the move was pure hubris. I expect China to fire FedEx, too.
“Because FedEx ground has misdelivered 3 shipments in a week, I’ve asked Amazon to not use FedEx for my orders.”
Same here! All PR is suspect, of course: I think FedEx might have quit Amazon before Amazon could fire them.
I would be curious as to how your route planning is done? Computerised using an app? Plus, how your van is loaded up as per the efficient route? And, who loads the van and is that part of your day?
When I left FedEx, we we’re already using computer models to plan routes. I am not sure how good it is. I believe UPS is the expert in route planning as even the better engineers in my time left to go to UPS at Atlanta.
One of the main reasons for the misdelivery at my home is that GPS coordinates is actually wrong for my 120 yard driveway.
I live in the woods of Southwest CT where the hedge funds conglomerate so I’m not exactly rural.
Technology is good until it is not. The FedEx ground subcontractors who are paid $1.20 a delivery does not care about anything else. Since I am an old timer in this industry, my USPS mailman and the 3 UPS guys who do my route are actually already my friends. I cannot say the same for the FedEx guys. I’ve lived at the same place for more than 25 years, so I don’t understand why FedEx can’t get it right.
The delivery routes are computer generated.
I am directed to each stop using a GPS driven map.
I do not have a set route like USPS.
I do not need to be familiar with the area that I am delivering too.
Amazon outsources the deliveries to several trucking companies.
Company A arrives at the warehouse at say 6 A.M. Company B arrives at say 7 A.M.
The carts holding the bins containing the packages for my daily route are put in a numerical staging area.
I take the carts to my van and load the bins into my van, last in first out.
Each bin represents a geographical area, like say a neighborhood.
Once I am at a stop, I scan the package, which ensures I have the correct package for that address.
Also, if I am not at the correct address, I will get a GPS driven notification that I am out of the delivery area.
I typically take a photo of the package upon delivery which is emailed to the customer.
Amazon’s goal is a 99% or higher delivery rate.
Just goes to show you that Jeff Bezos illegal and Unconstitutional contract with the CIA is totally sucktacular.
Fedex doesn’t have the economies of scale UPS has.
Sorry, I don’t think you are correct. Both of them have economies of scale.
Amazon can keep on using the post office for the last mile and connect their centers using third party planes and trucks when it does not have to do it themselves.
The best thing anyone can do for the environment – and for their own economy – is spend less money.
Just don’t buy it! Think at least twice…
That’s our best weapon against big companies such as Amazon.
Governments and others keep telling us that we need growth in the economy, if not….! And at the same time they tell us that we need to take care of the environment.
Well, the less stuff that has to be produced the better it is for the environment. If we don’t demand it, they don’t produce it.
So, “Just Don’t Do It” – don’t ask for it. At least think twice….
BJ:
“Contradictions” of C(r)apitalism…….
Or as that long dead president’s spouse said years ago: “Just say no!”
If this economy had depended on me for support it would have been broken decades ago! LOL!
“What Fools These Mortals Be!”
A line from the play A Midsummer Night’s Dream, by William Shakespeare. A mischievous fairy, Puck, addressing his king, is commenting on the folly of the human beings who have come into his forest. (The “Forest” here is the consumer market!)
AMAZON is extending their operational networks to be even more invasive, affecting the UH? Customer.
Next stage will be customers dealing with the DRONES, especially because of the fact that there is also no FAA regulations of the critters, that are noisy, create dodging nuisance, safety issues for all pedestrians, animals, birds, etc. We’re gonna have fun cowering in our homes, and on the streets.
You won’t even be able to shoot the things if you’re attacked. Those cameras will document you. Since, AWS is also the expected US government “server supreme”, the customer is not really THE customer at all. FedEx can deliver some hope to counter reality for some for a while longer. AWS will allow more skimming of the monies to a few more of the buddies that are the real customers.
FedEx drivers in KY make about $16/hr.
Considering the fact that they are overwhelmed by deadlines and exhausted by heavy lifting, I find it a miracle that FedEx still has drivers around here.
FedEx, like other corporations, can always import more Third World wage slaves who will work like dogs for peanuts and accept even the most onerous exploitation without complaint. Isn’t globalism grand?
The race to the bottom just accelerated for the 99%, while the rapacious oligarchs and their monopoly cartels insist on further cost cutting to bolster their own obscene wealth and power.
Remember when America was a republic instead of an oligarchy? Me neither.
Estate Sales& Garage Sales. Estates sales. Net. Great real wood furniture, kitchen supplies.
Dealers scour there. I have bought Persian rugs& immediately go for professional cleaning. Lots of my books Costco it the local Friends library sale for .50 to $1.00. I donate 90% of my books after reading them back to the Friends library sale. I was surprised how many new books were there that I bought from Costco the last 6 months when they had library sale 2 weeks ago.
PS:
For those who love books there is a vast supply system in our country using the public library as the source. There is no reason for those who are not under some kind of time constraint to have to “buy” any books. The inter-library loan system I believe can be used by any one with a library card. Those books can be obtained from “wherever” as long as there are time needs involved. I use the system all the time.
Guys and gals, please put this in perspective.
It’s the airplane that FedEx does not want to share with Amazon anymore. FedEx has a lot from the post office flying mail so they are probably emboldened and think they don’t need Amazon.
By not flying freight for Amazon, FedEx thinks it can get what it wants. Either delay Amazon’s rise or negotiate better prices. Remember planes tend to bulk out faster with a lot of light Amazon packages and that is part of the equation here.
Won’t they be delivering everything by drone soon?
Brother works for a large freight forwarder/shipper and has clients at major firms. These guys are trying to chisel each other all the time (for about 25 years now- the fat times are gone). Once in a while they’ll just tell a customer goodbye. Often with positive results- there was no profit.
When you hear this a lot, it means something has to give in the wider economy- like companies that consistently run in the red.
A few things:
1. they often bill by weight (remember miniaturization….)
2. the last mile is the most expensive
3. there are boutique shippers (better insured, more service on difficult customs, etc.)
Amazons venture into delivery by launching a delivery service for their own packages and businesses that competes toe to toe with United Parcel Service Inc. and FedEx Corp. shows an arrogance that should force any logical investor to question why their stock is trading at a such high multiples. The delivery arm of Amazon is named “Shipping with Amazon,” or SWA will soon find just how hard it is getting packages to customers quickly and in good condition.