AWS all over again, just bigger

Amazon is on the rinse and repeat cycle. It was announced with this headline — Amazon opens up its logistics network to other businesses in new growth push.

If there was ever a recurrent pattern, this is it.

Until now, Amazon delivery was unique to Amazon. You click the button ‘buy’ on the Amazon website and in minutes or a few hours; day or night, you get your package at your doorstep courtesy of free shipping when you sign up for Amazon Prime. Shopping on other websites — you either pay to get delivery by a postal service or courier such as FedEx, UPS or DHL.

Now, there will be Amazon.

This pattern started in the early years of the 2000s. Amazon originally started as a market place for books, and later added music and video. As Amazon developed technology for its own use and needs, there was a push to provide the same technology to other companies to conduct eCommerce. Remember, it was the early 2000s and very few could spell the word Internet.

The early attempts — as described by people from then — were a mess. Imagine your IT department starts building a product for other companies to use. The need for change manifested by establishing a new subsidiary, Amazon Web Services (AWS). Separated from the mothership, AWS designed not an eCommerce engine, but a scalable IT infrastructure we affectionately call ‘cloud’. A concept copied by Google, Microsoft and a few others.

The interesting part in this whole thing is that AWS provides services to Amazon and at the same time to all its competitors. Since its beginnings when it provided basic computing, file storage and database services, AWS grew to a behemoth which provides IT infrastructure around the globe.

What started as an afterthought when dealing with internal IT problems, became a gigantic success for Amazon.

Welcome to the year 2005. Amazon launched Amazon Prime subscriptions which entitled you to unlimited 2-day delivery. In 2006, it added to its marketplace Fulfilled By Amazon — “a program that lets you outsource order fulfillment to Amazon and offer customers free, two-day shipping through Prime. By enrolling in FBA, you can send your products into Amazon’s global network of fulfillment centers, and we’ll pick, pack, and ship orders, as well as handle customer service and returns.”

Over 20 years Amazon was building warehousing, distribution, shipping and more; a complete Amazon Supply Chain Service and now it has launched it for every other business.

No wonder, the stock dropped for FedEx and UPS. Both companies now have competition like never before. When you think about UPS or FedEx, you think shipping. True, both companies provide additional services but everything is about ‘shipping’.

Amazon is now coming from the other side. First it built the eCommerce website, then opened it for others. Next was IT infrastructure. Then it opened its warehouses for others to store their products to be sold and shipped using Amazon.com. Now, Amazon is opening its logistics for everyone. I don’t think that the parallel between Netflix and Blockbuster is completely accurate, since there are so many other things which Fedex or UPS and others like DSV, Naersk or Kuehne+Nagel are shipping, but Amazon has the experience how to handle 12 million of different type of products!!

Now the question for UPS and FedEx and every retailer is going to be — what’s next for us? If you are a retailer, will you integrate your systems with Amazon? I am sure that anyone with Amazon Prime will be eligible for either free or discounted shipping. Will you wait for your competition to switch first and lose customers because your shipping is too high? FedEx and UPS, how will you compete for your customers? You have a hard time maintaining your margins. Will you keep adding new and better services or will you retreat from certain markets? Or an even better question — Did you see this coming?

The recurrent pattern? What will be the next ‘thing’ which Amazon will launch? Amazon is about to deploy its own satellite network — a competition to Starlink. Once fully operational, maybe Alexa will morph into a phone, a phone free to Amazon Prime subscribers. Apple did you see this coming?