Amazon wants to build a massive delivery network in the U.S. capable of competing with FedEx and UPS in a move that could potentially alter the traditional seller-sender relationship, reports The Wall Street Journal.
The plan comes as Amazon's shipping costs continue to rise. In 2015, the online retailer spent $11.5 billion on shipping, or about 10.8 percent of its $107 billion in revenue for the year. In 2010, Amazon spent just 7.5 percent of its sales on shipping. Citigroup analysts estimate the company could save $1.1 billion every year if it stopped using UPS and FedEx to ship packages.
At present, Amazon delivers its own packages from about 70 facilities in 21 states, according to data from MWPVL International, and 44 percent of the U.S. population lives within 20 miles of an Amazon facility.
"We are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service and our own delivery efforts are needed to supplement that capacity rather than replace it," an Amazon spokesperson told WSJ in an emailed statement.
However, inside the company, one senior executive said Amazon "is building a full-service logistics and transportation network effectively from the ground up," according to the report.
Despite Amazon's confidence in building a global delivery network, some freight company executives and logistics experts are skeptical. UPS and FedEx combined own about 4,000 facilities around the world to sort tens of millions of packages a day and operate more than 1,000 planes and 200,000 vehicles.
"The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic," says Alan Graf CFO of FedEx. "We've been at this for 40 years."
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