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Logistics will be crucial for the future of Amazon, Uber and e-commerce itself

P101 in collaboration with Trademachines | May 9th, 2018

It’s clear, by now, that the world of online retail has disrupted the way we shop. This is so true that even in our very neighbourhoods we happen to see small and medium-sized businesses surrendering to the hegemony of digital shopping. Setting aside any easy condemnations, it should be noted that these web giants have found a way to respond to a real demand of the market, and to masterfully transform it in the name of rapidity and unlimited product availability.

When addressing these issues, one cannot avoid mentioning Amazon, the record company founded by Jeff Bezos in the mid-1990s to sell books online. After surviving the digital crisis of the early 2000s, the company has accumulated annual revenues for a sum that will likely make it a part of history: Amazon could soon breeze through the trillion dollar target, breaking away from Alphabet, Microsoft and other web giants.

There is a lot of excitement around the Seattle company: on the one hand, there’s the massive media coverage of Bezos himself, by now the single richest individual of all time, on the other, there’s a continuous request for regulations by institutions and employees. The Italian working landscape is no stranger to the latter point: indeed, in terms of taxation, the Italian Agcom considers the company as a postal operator.

If such a positioning can be understood, it must however be kept in mind that Amazon is “also” a postal operator but not just that. The offer proposed by Bezos is now so diversified that classifying it under a specific category is indeed a difficult enterprise. Amazon offers classic online retail but has also a supermarket chain (the futuristic Amazon GO), and the streaming service Amazon Prime Video. Bezos seems to have fallen prey to a volcanic creativity, the same creativity leading led him to dominate, among other things, the ebook industry, with all due respect to Apple & Co.

However, this expansion in several directions is not accidental and has a well-calculated business plan behind it. For example, Amazon has rented as many as 40 Boeings until 2021. What is the company’s interest in the field of air mobility?

If not yet clear, Amazon has repeatedly shown interest in wanting to manage logistics organically, and to this end it is investing in different ways. The basic idea is very simple: having a large inventory and a fleet of vehicles, Amazon would almost ensure its monopoly on online retail. To do so, it must stop relying on external delivery companies. DHL, UPS, FedEx and the like have their strong and steady position in the business, but they also get a significant amount of deliveries from Amazon.

Perhaps, it’s with the Flex service that the company aims to disengage itself from these big names. Flex allows anyone owning an adequate vehicle to become a freelance on-demand delivery-person. This approach, which is closer to that of sharing economy than to the usual approach of big corporates, brings Amazon to the level of another (much smaller in terms of turnover) American company whose growth percentage is projecting it into the Olympus of the Silicon Valley. This company is precisely Uber, the creature of Travis Kalanick that has caused quite a stir (in particular in various European countries where taxi drivers have rallied against the company). Uber’s model, which is based on the initiative of freelance private individuals, has an ever-expanding catchment area and, according to the latest development of their business strategy, it could aim at the transport of goods as well as passengers. Proof of this is the acquisition of the company Otto in 2016, which has specialized in the construction of self-driving trucks. And the fact that in 2015 Uber presented its Rush service, which looks very much like Amazon Flex – that was launched in that very same year.

Will logistics be the battlefield of these digital big names? All we know is that online shopping does not show any signs of slowdown and the logistics industry is able of keeping its pace. Greater investments in shipping services and vehicles will be the key to dominate the industry, which, according to the latest estimates, moves a market that is 4 times the one of e-commerce.

Amazon and Uber really seem to be the candidates to a good share of this industry’s revenue. Amazon’s strength is its inventory, which outperforms any other retailer and attracts 40% of online shoppers, and Bezos has unprecedented investment power. Uber’s strength is its widespread reach, (virtually) allowing anyone to operate the delivery of a package with his/her own vehicle. It’s difficult to say which of the two will come up with the winning strategy, so we cannot really make any predictions at the current state. However, these two titans converge on a common target: to own the best fleet of vehicles for the shipment of goods.

Infographics: http://trademachines.com/info/amazon-uber/