In the quest to improve delivery times, Amazon (NASDAQ: AMZN) is building out its own delivery network. That's a big contrast to the way Amazon ships items in the U.S., which is primarily handled by UPS and FedEx, but hints at where the retailer could be headed.
China is Amazon's second-largest distribution network outside of the U.S. where 15 fulfillment centers house and ship products across the country. Some Amazon workers in China make deliveries using their own vans, bicycles, motorcycles and even scooters, a decision that Amazon says was made to make delivery more efficient.
"Once we entered the China market, we noticed that the logistics service was immature and far away from what we've expected," Fang Quan, vice president in charge of the marketplace platform for Amazon China, told Internet Retailer. "That led us to establish a delivery team of our own. Inside Amazon, Amazon China is the first to take delivery in-house, and we hope that in the near future it could be extended to other countries."
In the U.S., Amazon is currently experimenting with its own delivery unit for Amazon Fresh. Amazon Fresh provides same-day deliveries of local groceries to Seattle, San Francisco and Los Angeles. And of course, there's the testing of drone delivery, a program that is years away from implementation, at best.
Shipping costs are a growing concern for U.S. retailers as online sales are estimated to account for more than 30 percent of a retailer's total revenue in 2014. Retailers are having to rethink the most efficient and cost-effective strategies to transport products from the distribution center to a customer's doorstep.
As a result of rising shipping costs, Amazon announced last week it will be increasing the cost of its Amazon Prime membership in the U.S. Customers will now have to pay $99, up from $79, for two-day shipping.
Retailers are actively exploring ways to improve delivery to not just drive down costs, but to avoid the missing and late shipments experienced during the last holiday season.
-See this Internet Retailer article
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