Amazon is selling more goods and delivering more packages than ever this quarter, despite weather problems in the US, but a major UK investment is facing a big regulatory obstacle.
The e-commerce giant, which has predicted up to 20% revenue growth in the October – December 2019 quarter, has so far disclosed that it sold “hundreds of millions” of products worldwide between Thanksgiving Day and Cyber Monday, setting new records on Black Friday and Cyber Monday. In 2018, it sold 180 million items through amazon.com over the five-day period.
Amazon now faces the challenge of delivering these rising volumes to customers through postal and parcel delivery partners as well as via its own expanding logistics network.
In the US, where it reportedly now delivers about 50% of its volumes through the Amazon Logistics network, the retailer performed well in the Thanksgiving Day week at the end of November with on-time deliveries by its own drivers topping 98%, according to tracking data from Shipmatrix. UPS, USPS and FedEx also all performed well with very high on-time deliveries of more than 98% that week.
But Amazon slipped back in the first week of December, which started with the record-breaking Cyber Monday, dropping to 93.7%, the shipment analytics company disclosed on Wednesday. However, this was still better than UPS (92.7%), USPS (92.3%) and FedEx (90.4%), whose service performance dropped even more.
Severe winter weather, especially in the north-east of the country, caused delivery delays, and about 20% of residents in New England did not receive their packages as promised, ShipMatrix noted.
However, an Amazon spokeswoman claimed to US media that the ShipMatrix figures were “inaccurate” and added: “Some deliveries were briefly impacted by weather but we worked quickly to re-balance capacity across our network.”
Amazon is currently pressing ahead rapidly with its logistics expansion as it seeks to offer free one-day delivery for Prime members around the world. It is likely to invest more than $3 billion in expansion of its logistics operations this year, mostly in the US. Investments include new fulfilment centres to bring goods closer to customers, thousands of additional warehouse staff, more dedicated planes for faster transportation and more final-mile delivery service partners.
All this capacity, and much more, will be necessary if the latest forecasts from Morgan Stanley come true. The bank’s analysts said yesterday that Amazon Logistics now delivers about 2.5 billion packages a year in the US, which is about half of the company’s current total shipping volumes. In comparison, UPS delivers about 4.7 billion packages and FedEx about 3 billion packages a year across the country.
But over the next three years Amazon Logistics could grow dramatically by about 68% a year on average and deliver 6.5 billion packages annually by 2022, Morgan Stanley predicted. This would put it well ahead of UPS (5 billion) and FedEx (3.4 billion) who would grow more slowly, according to the investment bank’s growth estimates. Morgan Stanley highlighted Amazon Logistics’ focus on densely-populated urban areas and its efficient use of technology and resources as key growth factors.
Meanwhile, in the UK, Amazon appears to be facing regulatory problems with its planned acquisition of a minority stake in food delivery service Deliveroo.
The UK’s Competition and Markets Authority announced on Wednesday that the deal “raises serious competition concerns for UK customers that may require an in-depth investigation by the CMA” and gave the two companies just five days to address its concerns with legally-binding proposals, or otherwise face a full-scale probe. In particular, it warned that Amazon and Deliveroo could establish dominant positions in the food and grocery delivery markets in future.
Andrea Gomes da Silva, CMA Executive Director, said: “Millions of people in the UK use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries. There are relatively few players in these markets, so we’re concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses.
“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
The CMA noted that Amazon reported UK net sales from its online store of almost £11 billion in 2018. However, its overall UK business also includes its wider Amazon.co.uk marketplace and a wide range of grocery offerings through Amazon Prime and Prime Now, Amazon Fresh and Whole Foods Market.
Amazon already dominates the overall British e-commerce market with a 30% share, according to new figures from researchers Edge by Ascential. Second-place eBay has just 10%, followed by supermarket chains Sainsbury’s, Tesco and Asda and departure store group John Lewis, each with 5% or lower.
Separately, Amazon has announced it will open its second distribution centre in Brazil in the first half of next year with a new facility close to Recife in the northeastern state of Pernambuco.
