For Jeff Bezos, there’s one aspect of online marketing and sales even more important than the tech he’s developed to turn Amazon into a household name — delivery. If Amazon can take control of that aspect of its business, then the online game changer and industry creator will manage every aspect of its “product to customer” pipeline.
Delivery remains a major expense for Amazon, and, currently, a loss leader in its profit formula. Bringing this service in-house could not only save the company money, it could actually begin to earn the company money it now pays to delivery services like UPS and USPS.
To get there, Amazon will have to lay out serious funds in infrastructure development, but that’s something Bezos has never been shy about doing. Recently, the company announced plans to construct a new air cargo hub in Kentucky. If they can pull this off, they will control one major aspect of cross-country delivery, reducing prices for them, and offer the company the ability to pass those savings onto their customers, especially Prime members, who already enjoy free two-day shipping on many items.
Speaking of Prime, last spring Amazon made a major investment in in-house shipping by leasing a fleet of jets and another fleet of trucks, the former was playfully dubbed “Prime Air.”
All of this investment is pushing more cash and resources into the gamble Amazon made years ago and continues to make every day – that online sales will continue to grow. The company has become a retail killer, siphoning so much business away from various businesses that not only stores but entire malls, are closing down.
As Amazon continues to re-invest profits back into the business, expanding its footprint and finding ways to make its infrastructure work better and faster, the company still manages to put up record profits. Revenue was up 22 percent last quarter, as compared to 2015, while profits jumped 36 percent.
The new air hub will be about 13 miles southwest of Cincinnati, one of the most central locations the company could have chosen for trying to move products around the country. Amazon looks to invest more than $1.5 billion on its way to creating 2,700 jobs at that facility alone.
The move is a big one, even for Amazon. For years company spokesmen have sworn they were not moving toward in-house delivery, saying they just want to keep costs down and deliver faster for their customers. The new investments were “helps” not “replacements.” Now, UPS and FedEx aren’t so sure. Will this move set up a shipping battle between the two big shippers and the online retailer? So far, no … but as Amazon continues to dabble in in-house shipping, that’s bound to change.