Amazon joins numerous startups in building delivery networks to disrupt Fedex and UPS.Stung by delivery delays last Christmas, Amazon has been testing its own last mile delivery service. In a move that could harm its current shipping partners, Amazon has built out a fleet of delivery trucks in test-markets including San Francisco, New York, and London.
Amazon characterizes this initiative as a way to increase control over the end-to-end customer experience, as well as to stem rising delivery costs. In the first quarter of 2014, Amazon’s fulfillment costs as a percentage of sales reached an all-time high of 14.8%. It currently costs Amazon $2-8 to ship one package, a meaningful amount at such a large scale. In 2013, Amazon shipped 608M packages, with 30% and 17% of deliveries being handled by UPS and Fedex, respectively.
The Disruptors: Horizontal or Vertical?In the Silicon Valley, numerous startups have been emerging to tap into the “Last Mile Logistics” market - some as a horizontal play (example: Shyp - packages picked up from your home), and some as a vertical play (example: Door Dash - restaurant food delivery).
The universe below is by no means exhaustive, but serves as a map of the types of startups in this space.
The 15 companies below have particularly high DataFox Quality Scores. Plotting them on a graph versus Founding Year gives us a sense of the “quick risers” in the space. We noticed that the top quartile companies tend to be horizontally-oriented, rather than vertically-oriented.
However, this conclusion is subject to some sample bias stemming from the fact that many companies that could eventually branch into last mile logistics may not characterize themselves as such yet. Door Dash and Uber are two companies that started in restaurant delivery and ride-sharing, respectively, but from the beginning have positioned themselves as broader logistics companies. Earlier this month Uber formally launched a courier service, starting in New York City.
For the interactive list of 15 companies in Last Mile Logistics, visit the DataFox watchlist here:
Amazon acquisition targets?Amazon’s in-house delivery initiatives have not been without hiccups. The Wall Street Journal identified certain packages shipped by Amazon to its San Francisco office as arriving a few days later than scheduled.
Perhaps Amazon could benefit from the slew of startups entering the space, either through acquisition, or by learning from and copying any best practices. In the meantime, keep an eye on those shipping labels to see how the split between Amazon’s various delivery options develops.
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The information contained in this post, while intended to interest investors, does not constitute investing advice or services. Future trends and predictions contained herein are derived from industry news and public information. These “forward looking-statements” are speculative, subject to risks and uncertainties, and are not guaranteed. Actual results may vary. Potential investing decisions should be made by consulting a professional legal, tax, investing or accounting professional, where risks and suitability can be throughly evaluated. DataFox makes no obligation to update or revise any of the statements contained herein.