Monday, July 10, 2017

Amazon's Prime Day marks debut of Prime Air cargo planes, a FedEx, UPS threat

Amazon says its ​Prime Air cargo planes are "fueled and ready to support Prime Day in the U.S. for the first time."

Amazon's annual Prime Day deals bonanza kicks off tonight and early estimates suggest the event will be another epic sales windfall for the ecommerce giant. Last year Prime Day marked Amazon's biggest sales day ever, with orders increasing more than 60 percent above average.

But beyond sales revenue and gadget discounts, Prime Day also marks the first major use of Amazon's Prime Air freight network. In a press release Monday morning, Amazon said its Prime Air cargo planes are "fueled and ready to support Prime Day in the U.S. for the first time."

"Our fulfillment centers are loaded with products, our operations associates are ready and our transportation partners around the world are excitedly waiting for the first Prime Day order," said Greg Greeley, VP of Amazon Prime, in the release.

The Prime Air network includes approximately 40 Prime-branded Boeing 767-300s operated by Amazon's cargo partners Atlas Air and ATSG. The cargo planes will provide supplemental shipping capacity for Prime Day orders and additional flexibility as Amazon's Prime subscription service grows.

The cargo network is also Amazon's answer to its skyrocketing shipping costs, which increased more than 40 percent in 2016.

Amazon currently uses a combination of delivery services from UPS, the U.S. Postal Service and FedEx to carry out shipments, but the ecommerce giant has been looking into proprietary, in-house logistics and high-tech delivery alternatives for several years.

In 2015 Amazon was granted permission from the Federal Aviation Administration (FAA) to test-fly drones for its then-theoretical Prime Air delivery service and it's even mapped out airspace across the U.S. that would be dedicated to commercial drones.

The broad deployment of drones for delivery services is still somewhere off in the future, but Amazon's fleet of cargo planes provide a near-term solution that could help the company save billions of dollars in the long run. Amazon's shipping costs will likely increase again this year, especially as delivery providers including UPS explore per-package cost increases during peak shopping periods.

Amazon needs to become more efficient than its current shipping partners to really cut out the middle man and make the in-house logistics strategy work, but if successful, Amazon's shipping costs could turn into yet another profit stream.

(Natalie Gagliordi - Between the Lines / ZDNet)

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