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The Amazon threat: part 2

Traditional retailers need to consider how they will compete against Amazon's growing logistics network, says Morgan Stanley analyst.

Schenker - Amazon

Ravi Shanker, executive director at Morgan Stanley, came to the Retail Industry Leaders Association (RILA) LINK2020 supply chain conference to warn attendees about Amazon.

"Now before you say, 'Ravi, welcome to 1995,' let me clarify," quipped Shanker. "I am not talking about the e-commerce threat, I am talking about the logistics threat."


Since 2015, Amazon has been very thoughtfully building out an end-to-end logistics network, focusing on densely populated urban ZIP codes while using partners such as the U.S. Postal Service to handle delivery in rural areas.

According to Shanker, in 2019 Amazon moved half of its packages—2.5 billion boxes—in house. "[Amazon Logistics] will be larger than all FedEx by this year and UPS by 2022," he predicted.

Furthermore, according to Shanker, Amazon was able to accomplish this feat using a fleet a fraction of the size of the other companies'. Nor has the company finished investing in logistics. Shanker says Amazon plans to quadruple the size of its fleet in the next two to three years. With this type of scale, Shanker predicts that Amazon will be able to provide one-day delivery anywhere in the U.S. for under $5 per box.

Shanker believes that one of the reasons Amazon is building out this vast logistics network is that it plans to take a page from Amazon Web Services' playbook and provide logistics services.

"How are you going to compete on a cost basis?" Shanker asked attendees. "The last thing  you want to do is pay Amazon to use unused space on their truck."

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