It’s a buyer’s market for Amazon as it builds its next billion-dollar business

E-commerce is soaring in the US and, as Amazon’s need for rapid and reliable logistics grows, it is increasingly looking to build its own capacity to deliver.

And, as travel has taken a nose-dive following the pandemic, Amazon has found ready sellers of 11 passenger aircraft at bargain prices. Converted to cargo planes, these will be delivering the goods this year and next. Logistics should be wary of the growth of Amazon Air.

The context

• Amazon now delivers two-thirds of its own packages in the US and has a fleet of 20,000 vans, as existing couriers like FedEx, UPS and USPS have failed to keep up with its demand over the last three years.
• Observers see the planes’ purchase along with new delivery hubs in the US and Europe as part of Amazon’s ambition to build capacity and take on established logistics giants.
• It did the same with Amazon Web Services, built to carry Amazon’s own site traffic until it was big enough to take on external clients. That’s now thought to be worth $400 billion as a standalone business.

Soundbite

“At some point, just as they’ve done with other parts of the organization, they [Amazon] build out capability internally, see their own business as their first customer, and then they look to sell that capability to others. And this, I would suggest, is another perfect example, with the planes being an extrapolation of exactly that” – Thomas O’Connor, senior director and analyst for Gartner’s supply chain strategies team.