Retailers are under growing pressure to “step up their game” in last-mile delivery, after learning this week that e-commerce giant Amazon has reportedly surpassed the incumbent parcel carriers UPS Inc. and FedEx Corp. in the amount of packages it delivered to U.S. homes last year.
According to published reports, Amazon delivered more units than UPS in 2022 after passing FedEx in 2020 and is on pace to widen the gap even further this year.
But while that achievement marks a milestone in the U.S. parcel delivery landscape, it does not represent a serious threat to either national carriers like UPS and FedEx or to the growing number of smaller regional carriers, said Itamur Zur, co-founder and CEO of Veho, a provider of next-day delivery and returns for e-commerce companies.
That’s because Amazon is not a direct competitor to UPS or FedEx, but rather to the nation’s other Fortune 500 retailers, Zur said. While the Seattle-based company does gain increased control over its own network through the sheer size and vertical integration of its parcel delivery operation, that is not its main goal, he said. Instead, the company is mainly trying to preserve the loyalty of fickle online shoppers.
“Amazon thinks about logistics differently from everybody else,” Zur said. “They all think it’s a cost center and the package just needs to get to the right address, but Amazon sees it as a key lever to meet or exceed customer expectations, and ultimately to make that customer come back again for repeat sales.”
The shakeup in carrier rankings comes as the parcel sector continues to evolve. According to Zur, last-mile delivery is increasingly important to retailers for two reasons. First, most companies diversified their carrier base during the pandemic to mitigate the risk of failed deliveries, and that change has persisted. And second, there is a growing trend to stay in closer touch with the customer, culminating in the “moment of truth” when a consumer receives the package they had ordered.
But while those goals seem obvious, they are not easy to achieve, he said. “Amazon continues to widen the gap over UPS and FedEx, which were designed for the 20th century, not for speed, personalization, technology, and customer experience. Consumers can buy the same products at other stores, and Amazon’s website isn’t that different from anyone else’s, so where is the difference? It’s in delivery, and Amazon is now putting pressure on everyone else to step up their game,” Zur said.
