Why UPS Should Be Very Afraid of Amazon's Delivery Plans

Senior Entrepreneurship Writer at CNBC
3 min read

Amazon has already changed the way we shop and consume media. Who's to say the ecommerce giant can’t also overhaul how you get your mail?

Amazon is testing out a pilot program in which its own fleet of drivers will bring Amazon packages to your door, completing the "last mile" of the delivery process, according to a report in today’s Wall Street Journal.

Amazon was not immediately available for comment.

The Seattle tech giant has been dropping hints for some time that it might develop its own delivery network. And it would be a smart place for the company to be looking for innovation: Amazon’s shipping costs have been consistently rising in recent years. 

Related: Amazon Launches Pilot Program Selling 3-D Printed Products

In 2013, Amazon spent $3.5 billion on shipping, according to the company’s latest annual report. That’s because Amazon’s shipping revenues did not cover its shipping costs. While Amazon charged for shipping to the tune of $3.1 billion, the ecommerce giant spent $6.6 billion on shipping in 2013, according to the report.

The $3.5 billion Amazon sank into shipping is an increase from the previous two years, too. The company spent $2.9 billion in 2012 and $2.4 billion in 2011.

In his annual letter to shareholders, Amazon founder and CEO Jeff Bezos mentioned that in the U.K., the ecommerce giant had already created a “last mile” delivery service because the delivery services in the country could not keep up with its busiest delivery schedules. And he alluded that this was just the beginning. “In India and China, where delivery infrastructure isn’t yet mature, you can see Amazon bike couriers delivering packages throughout the major cities. And there is more invention to come,” he wrote.

Related: Is Amazon Making Peace With Its Retail Frenemies?

A trip through Amazon’s job postings reveals that the ecommerce giant is on the hunt for a handful of top-level transportation management logistics experts. One job posting specified it was looking for someone to “be an owner of Amazon’s scheduled delivery operations, helping us optimize our carrier delivery performance, decrease costs and achieve a superior last-mile delivery experience.” Another managerial role Amazon is hiring for would “analyze the delivery performance across the North American transportation network, identify improvement opportunities and then take business improvement programs from inception to successful implementation.”

The last-mile delivery program is being beta tested in New York, L.A., and San Francisco, according to The Wall Street Journal’s report.

Amazon has been aggressively moving into new markets as of late. Earlier this week, the Seattle giant announced a program called Prime Pantry. Available to members of its subscription shipping service, Amazon Prime, Amazon Pantry allows customers to order up to 45 pounds of non-perishable household goods for a flat shipping rate of $5.99.

Related: Taking Aim at Costco and Walmart, Amazon Launches Prime Pantry

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