Amazon Logistics Soars: Company Delivers Half Of Its Own Packages, Rivals UPS And FedEx

Amazon’s in-house shipping infrastructure has reached an impressive scale and will soon dwarf its major competition, a report stated Thursday.

According to analysts from Morgan Stanley, Amazon Logistics now handles roughly 50% of all the e-commerce giant’s shipments in the U.S. The service more than doubled its portion of the shipping industry, up from 20% last year, and currently handles around 2.5 billion packages per year.

“We see more of this going forward as our new bottom-up US package model assumes Amazon Logistics US packages grow at a 68% [annual growth rate from 2018-2022],” the report from Morgan Stanley said.

By comparison, United Parcel Services (UPS) and FedEx currently ship 4.7 billion and 3 billion packages a year, respectively. By 2022, Morgan Stanley estimates that Amazon Logistics will ship 6.5 billion packages per year, dwarfing the estimates for UPS and FedEx, 5 billion and 3.4 billion.

“To us, Amazon Logistics is already-large scale and with a fleet - 1/5 the size of competitors,” the report said. “It speaks to its ability to use density and technology to drive efficiency.”

Morgan Stanley reports that Amazon Logistics’ business is currently more focused in urban areas than its competition. The company’s package volumes currently break down to 61% in urban areas, 28% suburban, and 11% rural. This latter statistic stands out the most from the rest of the shipping industry, where rural deliveries make up 20% of the business.

One factor that could be contributing to the rapid growth of Amazon Logistics is the recent introduction of 1-Day shipping for Prime members in certain areas. Amazon introduced this initiative in April and says that it will be expanding the option to more regions and markets in the near future. In the third quarter of 2019, the company spent $9.6 billion on fulfillment, which went toward making 1-Day shipping possible and growing its Logistics operation.

“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year,” CEO Jeff Bezos said at Amazon’s third-quarter earnings call in October. “It’s a big investment, and it’s the right long-term decision for customers.”