July 12th, 2012
I wasn’t entirely surprised to read Farhad Manjoo’s interesting piece about Amazon moving from two-day and overnight shipping to overnight and same-day. (A military friend of mine who specializes in high-level logistics planning was just hired by the company to work on standing up new shipping centers. I figured they wouldn’t have poached him if they were only going to be building one or two new shipping centers.)
But I do wonder if Amazon also risks getting boxed in by UPS. Because if they move to overnight and same-day shipping, they become completely beholden to a single vendor. Which is never a good thing, even if you’re the world’s second largest monopsonist.
As things stand now, Amazon has a theoretical alternative to UPS. They could, if push came to shove, threaten to go with the USPS to make their deliveries. It wouldn’t be smooth. It would cost too much. But in the even that Amazon hit an impasse with UPS over contract renewal, they could use the Post Office as a stop-gap until they brought Fed-Ex online as their primary shipper. (Of course, at that point Fed-Ex would have enormous negotiating power and Amazon would likely get screwed in any deal.)
But once Amazon goes to overnight and same-day delivery, there is no stop-gap. Fed Ex is the only operation who could fill the role and they couldn’t do so overnight. UPS will have the power to effectively shut down Amazon.
Would it hurt UPS to lose what is probably its biggest client? Absolutely. But UPS has lots of other clients. Their profit stream may (or may not) depend on Amazon, but the UPS machine wouldn’t grind to a halt without them. Amazon’s entire business would.
And if you’re UPS and you see that Amazon is making a killing and putting all of its brick-and-mortar competition out of business, then you should probably conclude that, since you’re the indispensable intermediary, you’re not charging them enough.
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DHL?
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A very interesting post, (and I must admit I had to look up monopsony in my OED).
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I buy a lot–a lot!–of stuff from Amazon, utilizing my Prime membership. Most of it is piddly stuff; a few bucks or so. It does indeed arrive in two days or less, and much of it arrives via USPS with delivery confirmation. Come to think of it, when stuff arrives (unexpectedly) a day early, it’s usually USPS.
It might be correct to say that Amazon will save the post office.
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For same day, Amazon uses a lot of other courier services. LaserShip is one example.
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I got too distracted about 3 sentences into it (about my state’s use tax)–just began wondering how FTB will come after that now, maybe even with some special compute cloud auditing engine using Amazon’s server net. You know that rural bullet train isn’t going to finance itself
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OK, went back and finished reading it; he makes a good observation about AMZN’s strategy–seemingly they read the writing on the wall re: nat’l sales tax (I remember when the National Review editors used to reply to this perennial threat with the simple retort, “World’s Greatest Deliberative Body”) or its effective equivalent by local tax harmonization. However it would seem they also took a moment to size up Walmart & decided they like those odds. On another note maybe Slate should debug the picking robots copy-editing their site, e.g. “As a subscriber to Amazon’s Prime subscription service”
WershovenistPig July 12, 2012 at 4:36 pm
Bike messengers in DuPont Circle?