business news in context, analysis with attitude

The Motley Fool has a piece about why Amazon likely is investing in various shipping businesses, as it appears to be looking for ways in which it can compete with the US Postal Service, FedEx and UPS, even though "package delivery has been a cyclical low-margin business."

The story notes that "delivery is the one major aspect of Amazon's business that it does not control," and asserting some level of control "could pay dividends beyond small profits, as a successful system would improve customer satisfaction and loyalty."

According to Bernstein Research, the Motley Fool writes, "the company shipped close to 500 million packages last year, with USPS delivering about 40% of them. UPS owned 20-25% of the share, and FedEx 15-20%.  Inconsistency on the part of these organizations can create problems: "Not only does this leave Amazon with frustrated customers and complaints, but the company often gives out credit for purchases or months of Prime membership as a form of compensation. Some customers have even become so frustrated with delivery headaches that they've sworn off the service."
KC's View:
When you think about it, extending its business model into the shipping business simply makes sense.

Internet Retailer had a story the other day saying that "ChannelAdvisor says its clients use the Fulfillment by Amazon service for nearly 40% of orders on marketplaces." And Amazon's fulfillment business growth may indeed be dependent on its ability to deliver on its promises ... literally.

And the Huffington Post reports that US Prime membership now has increased to 54 million, up 35 percent from a year ago ... and continued growth of this number likely is dependent on its ability to deliver on its promises ... literally.

Ecosystems, to be viable, have to both grow and be stable. That's what delivery is designed to do.