According to estimates published by Morgan Stanley, Amazon is now delivering 2.5 billion packages in the United States per year. Amazon's logistics capabilities has doubled within the last year from accounting for around 20% of Amazon package deliveries to more than half of all Amazon package deliveries. Amazon Logistics is rapidly catching market leaders FedEx (3 billion packages/year) and the United States Postal Service (4.7 billion packages/year). Although growing its own logistics capabilities is costing Amazon a fortune, it will soon own the entire delivery chain of its products, an accomplishment that will result in dramatic cost saving and efficiency improvements.
The quest to own more of its delivery chain has definitely not come cheaply. Just this year, Amazon reported a nearly 50% increase in its fulfillment and shipping costs (a total of $9.6 billion) over a three month period (June - September). Remarkably, Amazon is managing to increase the number of packages it delivers as well as the speed it takes to deliver them. This year, for example, Amazon began testing a shift from Prime two-day shipping to one-day shipping. Traditionally, the last mile of a package delivery is not only the most expensive for retail organizations but also the hardest for them to handle themselves. Amazon has launched numerous initiatives, such as Prime Air and Amazon Flex to meet the needs of their logistics goals.
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