The cost of shipping through popular parcel delivery services like UPS or FedEx is correlated to the distance that the product needs to travel during the end-to-end fulfillment process. However, what happens when the distance between retailer and company decreases?
The other day I mentioned the creation of 5,000 new fulfillment positions at Amazon thanks to the opening of new distribution centers near heavily populated areas. The closer these centers get to the consumer, the lower the cost of shipment. Additionally, Amazon has been increasingly taking advantage of their own fleet of delivery trucks. While this is especially true in the Seattle, Washington area thanks to the implementation of their grocery delivery service, the trucks are able to transport additional products Amazon sells as well. As this service expands, so will the delivery range of their trucks.
It's not just Amazon though – an increasing number of big-box multichannel retailers, like Wal-mart, have been shortening their shipping distances by offering the shipment of products directly from nearby brick-and-mortar locations that have the product in stock to consumers based on their radius. This not only cuts shipping costs, but enables consumers to receive the products more quickly.
Shortened delivery times and lowered delivery charges will encourage more consumers to turn to online shopping when looking to make a purchase, transitively leading to increasing the overall number of sales. Is this enough to ensure the safety of shipping services like UPS and FedEx in the future?
Susan Rosenberg, a spokesperson for UPS has said that the company has benefitted from the increase in fulfillment centers being created by Amazon and other companies.
Longistics executive Lou Tapper explained, "Big companies like Amazon and Wal-Mart will dictate which direction this goes," and that, "UPS and FedEx are not only watching this, they are likely concerned about it."
There is a lot of potential for trouble down the line for UPS and FedEx thanks to these ecommerce strategies, so it's important to mindful of this issue now and look for ways to remain relevant.
<Image: niallkennedy – Flickr>
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