Amazon is moving away from the US Postal Service and UPS in favor of its in-house delivery network. But customer receipts suggest the 'sloppier' system is causing more than twice as many packages to show up late.
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- Amazon is building up a huge in-house delivery network that now moves the majority of its packages. It is moving away from FedEx, USPS and UPS as a result.
- However, a new report from Rakuten Intelligence says Amazon's percentage of late deliveries has doubled from 2017 to 2019 as the retailer increasingly turns to its own delivery network.
- In 2017, from January 1 to mid-June, an average of 4.6% of items were delivered late, compared to an average of 16.6% in 2019.
- Despite this, some experts say Amazon's network will someday compete against FedEx and UPS.
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In February, Amazon CFO Brian Olsavsky made one thing clear about the retailer's in-house logistics arm: it's cheaper and often better than traditional delivery partners like UPS or FedEx.
"(W)e have great third-party partners as well in the transportation space," Olsavsky said in the February call to investors. "What we like about our ability to participate in transportation is that a lot of times we can do it at the same costs or better and we like the cost profile of it, too."
Wolfe Research; Andy Kiersz/Business Insider
But data from Rakuten Intelligence suggests the opposite. As Amazon's network delivers more and more of its own packages, late deliveries are becoming increasingly common. In 2017, from January 1 to mid-June, an average of 4.6% of items were delivered late, compared to an average of 16.6% in 2019.
Rakuten Intelligence gathered its data for the study via two apps in which millions of "panelists," or everyday e-commerce shoppers, can share their e-receipts with the intelligence firm. From those receipts and the tracking number listed, Rakuten Intelligence can understand if their Amazon packages are delayed, who delivered them, and other information.
An Amazon spokesperson told Business Insider that the numbers reported are not accurate.
"Rakuten Intelligence continues to report inaccurate numbers and the data they are sharing is wrong," the spokesperson said in a statement. "We are proud of our fast, free delivery for customers, and our on-time delivery rates continue to get better year-over-year."
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Amazon has traditionally relied on UPS, the US Postal Service, FedEx, and other partners to move its goods. Experts say Amazon's moves to build up an in-house logistics service not only suggests an interest in controlling transportation costs, but also a desire to build up a third-party logistics service that could someday compete against the traditional logistics giants.
But until then, Rakuten said Amazon's last-mile service is "sloppier" than its peers. The retailer's moves in logistics have been quick. Amazon's air-cargo network, for instance, launched in late 2015. The fleet will expand to 70 planes by 2021. (Comparably, UPS has a fleet of 550-plus aircraft and FedEx owns or leases 678 cargo planes.)
"Amazon rushes into things and cleans it up as they go," Rakuten's Alex Pellas, who led the study, told Business Insider. "They prioritize speed over getting it perfect every time."
The data suggesting late deliveries underscore why some logistics insiders are skeptical that Amazon will be able to launch a third-party logistics service, let alone keep all of its shipments in-house.
Still, Pellas said he believes Amazon's move to in-house logistics will eventually power the company's one-day delivery promise.
In April, Amazon said it was investing $800 million to turn its two-day shipping guarantee for Prime subscribers into one day, a move that was then followed by Walmart announcing one-day shipping for orders $35 or more. For Amazon, relying on UPS, FedEx, USPS, and the like may cause delays.
"There's some inherent time saving without having this hand-off and having the full control of the package from start to finish," Pellas said.
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