Amazon escalates FedEx and UPS rivalry by extending Prime to third parties
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Amazon will let other online merchants piggyback on its Prime service to quickly deliver goods to their customers.
The company on Thursday launched a new service, Buy with Prime, which allows third-party merchants to use Amazon’s extensive shipping and logistics network to fulfill orders on their own sites, while attracting the more than 200 million of Amazon Prime customers.
These websites will be able to display the Prime badge on their websites next to items that qualify for free two-day or next-day delivery. Prime members will use payment and shipping information stored in their Amazon account to place an order.
Buying with Prime won’t be free for sellers, and prices will vary depending on payment processing, fulfillment, storage, and other fees.
For starters, the service will be invite-only for sellers who use Fulfillment by Amazon, or FBA. With this service, merchants pay to have their inventory stored in Amazon’s warehouses and to use the company’s supply chain and shipping operations. Eventually, it will be extended to other merchants, including those who do not sell on Amazon.
Amazon has long aimed to be the fastest in the online delivery race. For years, the company has reinvested its profits into physical expansion, expanding its fulfillment centers and shipping partnerships across the country to offer two-day and same-day delivery in more markets. It has built up a sizable fleet of its own delivery drivers, trucks and planes to speed packages to customers’ doorsteps.
Industry watchers have paid close attention to Amazon’s growing internal logistics operations, speculating that it aims to directly compete with major carriers like UPS, FedEx and the US Postal Service. Indeed, Dave Clark, Amazon’s CEO for Global Consumers, told CNBC last year that Amazon was on track to become the nation’s largest delivery service by early 2022.
The company already handles some orders for products sold on other websites. It offers a program called Multi-Channel Fulfillment, which allows sellers to store and ship products using Amazon’s services, whether or not they sell on the home site.
Amazon previously offered a service where its drivers picked up packages from retailers and delivered them to consumers, but it was halted at the start of the coronavirus pandemic as Amazon was overwhelmed with online orders.
Although Buy with Prime is likely to be modest at launch, it could become a lucrative service for Amazon over time, said Bob O’Donnell, founder and chief analyst at Technalysis Research.
“If you think about it, one of Amazon’s most successful businesses started as an in-house tool,” O’Donnell said. “That being AWS [Amazon Web Services]sure.
“They initially built this huge logistics company for their own purposes and now they’re starting to leverage it as their own service,” O’Donnell added.
In some ways, Amazon has already turned its massive shipping and logistics operations into a cash machine. Amazon said third-party seller services, which include commissions, fulfillment and shipping fees, and other services, were up 11% year-over-year to 30.3 billion dollars in the last quarter.