There is evidence that Amazon is building infrastructure to deliver its own parcels as well as others. Whether it is a complete delivery solution, or a city-centric solution that offers density and frequent orders, only time will tell.
Competing against industry titans, Amazon has good reason to consider building it’s own infrastructure since delivery costs are about 12 percent of their $120 billion business. Amazon has a long history of making big bets with huge capital resources.
FedEx and UPS spend between $2.5 and $5 billion annually on expanding their logistics and technology. Their 40+ years of experience and coverage will be difficult to compete with. UPS has approximately 420,000 employees compared to Amazon’s 220,000.
To make last-mile deliveries profitable, Amazon need shorter drives and more packages per stop. The company is conducting its trials in large cities such as Los Angeles, Chicago and Miami. Those places have a high density of members who belong to Amazon’s $99-per-year Prime unlimited shipping program.