Will Amazon develop its own delivery fleet?

March 11, 2014 02:46 PM

While Inc. is the largest North American retailer, according to the Internet Retailer 2013 Top 500 Guide, it is also set to jump this year from the fourth-largest retailer to second-largest, behind only Wal-Mart Stores Inc., said Scot Wingo, CEO of e-commerce services provider ChannelAdvisor Corp. today during his keynote address at the annual ChannelAdvisor Catalyst conference in Las Vegas. ChannelAdvisor’s services include helping retailers sell on such online marketplaces as Amazon and eBay.

Amazon’s growth—it reported revenue of $74.45 billion last year, a 21.9% increase from $61.09 billion in 2012—is largely due to its unparalleled fulfillment network, Wingo said. Amazon has more than 100 fulfillment centers worldwide, he said, and Amazon plans to continue building more warehouses close to major metropolitan areas. By housing products close to the consumers buying those items, the retailer is lowering the price it pays to fulfill orders.

But Amazon’s growth is also straining fulfillment vendors, which was evident during the holiday season when UPS Inc., for example, failed to deliver many consumers’ packages on time. That’s one reason Amazon might soon decide that, rather than outsource package delivery to vendors, it might develop its own delivery fleet, Wingo said.

Amazon’s marketplace is playing a key role in its growth, said Wingo. Because online marketplaces like Amazon offer a broad product selection and low prices thanks to their competitive natures, they will continue to meet consumers’ needs and grow over time.

“Consumers’ behaviors are changing,” he said. “They want limitless buying options, they want the best price and they want the security of knowing the site they’re buying from.”

That explains why a number of retailers, such as Newegg Inc., have recently launched online marketplaces.

After Newegg launched its marketplace two years ago, its customer base diversified, said Soren Mills, chief marketing officer for Newegg North America, who also spoke during Wingo’s keynote. Before the marketplace launched, 90% of the retailer’s customers were men. After the marketplace launched that percentage dropped to 70%.

“It brought in a whole new customer base,” he said. 




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