May 13, 2019

In taking control of delivery, Amazon takes brand to the streets

On Monday, Amazon announced it would offer incentives to employees who quit their jobs at the company to start a business delivering Amazon package. The move is the enhancement of a program that began over a year ago to speed up Amazon’s shipping times, but it also comes with added benefits for Amazon, says Rick Geddes, professor of policy analysis and management at Cornell University and author of “Saving the Mail: How to Solve the Problems of the U.S. Postal Service.


Geddes says:

“One goal is to reduce delivery time from two days to one for its Amazon Prime members. However, the program may also result in improved control over other aspects of parcel delivery, such as tracking. Amazon is likely to enjoy greater brand recognition since the new delivery trucks will prominently feature the company’s logo.

“From an economic perspective, this is an example of vertical integration into a core input into Amazon’s business, which is parcel delivery. Amazon appears to be affecting that integration via a franchise model, similar to fast-food chains, which offer the parent company sufficient control to ensure uniform service quality. Importantly, package delivery is not covered by the same legally enforced monopoly that covers first-class mail delivery. Private companies are thus able to compete with the U.S. Postal Service in this space.

“This new program speaks to the increasing importance of fast, reliable delivery in the expanding e-commerce market. That desirable outcome is clearly enhanced by Amazon vertically integrating into package delivery.”

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