Fulfillment by Amazon (FBA) Onsite may also help firm negotiate lower rates with parcel carriers, Armstrong & Associates says.
By DC Velocity Staff
As e-commerce colossus Amazon.com Inc. continues to roll out new logistics service offerings to support its rapid growth, one of those services, called Fulfillment by Amazon (FBA) Onsite, may eventually pose a threat to some of the third-party logistics providers (3PLs) that now partner with Amazon, according to a report released Thursday.
While Amazon is a major user of 3PL services itself, the company has consistently expanded its own 3PL service offerings to merchants through a series of partnerships, acquisitions, and technological applications, according to the report from Milwaukee-based market research and consulting firm Armstrong & Associates Inc.
“We predict that its continued growth—in the form of third-party sales, international expansion, and new product categories—will cause Amazon to present increasing competition to 3PLs. This is especially true for its Fulfillment by Amazon business,” Armstrong said in its report, “E-commerce Logistics in the United States: Domestic and International Transportation, Warehousing and Fulfillment, Last-Mile Delivery, and Reverse Logistics.”
In the latest example of this expansion, Seattle-based Amazon rolled out its FBA Onsite product to select merchants. The company invited them to ship products through FedEx Corp., UPS Inc., and the U.S. Postal Service at Amazon’s deeply discounted bulk rate. In return, sellers would have to dedicate floor space Amazon inventory and install Amazon’s warehouse management system (WMS) software in their own DCs, it has been reported.
Amazon has provided no public information on the program, and did not reply to a request for comment.
Though FedEx and UPS stock prices initially fell on the news, the carriers’ networks have such massive size and scale that they will not be seriously harmed even if Amazon uses its increased volumes to negotiate lower prices, the Armstrong report said. “Rather than being a threat to parcel carriers, FBA Onsite exerts a more significant impact to 3PLs working with third-party Amazon sellers. Its recent reported efforts to enlarge its shipper base also hint at the company’s interest in expanding its role as a logistics provider,” the report said.
In the meantime, Amazon’s market share continues to increase. The e-tailer’s U.S. business-to-consumer (B2C) e-commerce market share is currently estimated at 43 to 44 percent, meaning that sales through Amazon account for about 4 percent of all retail in the country, the report said. By continuing its pilot of FBA Onsite and preparing for a reported nationwide rollout in 2018, Amazon could consolidate its control over that hefty share, and accentuate its dual roles as both an e-commerce retail and logistics powerhouse, the Armstrong report said.