Rumors have circulated in the press that Amazon.com Inc. (NASDAQ: AMZN) will take on FedEx Corp. (NYSE: FDX) and United Parcel Service Inc. (NYSE: UPS) in the package delivery business. Amazon uses the two services for a huge portion of its deliveries in the United States, but the logistics systems of the two companies are massive and employ tens of thousands of people. Amazon’s decision is an example of the e-commerce and cloud firm overreaching to battle businesses that it views as competitors.
Amazon has been successful in a number of diversification attempts. Its cloud computing operation, born from its own large server operations, leads the industry and has become a substantial and profitable business. It makes more money that Amazon’s core operations. Amazon’s move into streaming media also has made it one of the leaders in the sector. The service, which is part of Amazon’s Prime membership business, is a rival to industry leader Netflix. Amazon has moved into the multi-million dollar business of creating its own content, a risk because it cannot forecast viewership of this content.
Amazon has obviously gotten into the brick-and-mortar grocery business with its buyout of Whole Foods for $13.4 billion. The jury will be out for some time about whether this deal will be successful. However, it expands the company’s home delivery service while pitting it against aggressive rivals, particularity Walmart, which means to compete with Amazon head to head in a way smaller retailers have been unable to do.
Amazon’s record with consumer electronics is mixed. Its smartphone was a failure. Its Fire tablets have been a modest success, and Amazon may lose money on them. Amazon has become the leader in the new, home consumer electronics business due to the launch of its Echo and Alexa devices.
It is way too early to find out how serious Amazon’s delivery efforts may be. UPS and FedEx have hundreds of planes and tens of thousands of delivery trucks. Any effort to duplicate this would be beyond even Amazon’s skills and financial strength. That does not mean founder and CEO Jeff Bezos will not try to take a portion of their business. How much he will spend and how much he could lose will be open issues for some time.
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