On April 7th, 2020, Amazon announced that it would be pausing its third-party delivery service, Amazon Shipping. The last pickup for current customers will be June 5, 2020, and Amazon has not indicated when the program might be resumed.
The Amazon Shipping pilot program launched in 2018, and has only been available in select cities, including New York, Chicago, and Los Angeles. Despite the fact that the service is still in the pilot stage, Amazon Shipping has been a notable competitor of FedEx and UPS in those cities.
The program offers Amazon’s third-party merchants, who often utilize their own warehouses rather than Amazon fulfillment centers, access to Amazon delivery services. The decision does not affect deliveries shipped directly by Amazon.
Why is the program being paused, and how might the decision affect the industry?
Why is Amazon pausing the program?
Though Amazon has not directly cited COVID-19 as a reason for the decision, analysts point to pandemic-related supply chain disruption and increased demand for Amazon’s own products as likely contributing factors.
With people sheltering in place and ordering goods online, Amazon’s order volume has skyrocketed. Amazon has had trouble keeping up with the demand, resulting in significant delivery delays for nonessential items. Pausing the third-party shipping service may be a strategy to direct more resources toward fulfilling first-party orders.
There is also some speculation that the program simply wasn’t profitable enough to continue in its current iteration.
What does this mean for 3PL?
Although the Amazon Shipping pilot program was fairly limited, the decision to pause it will still have ripple effects in the shipping industry.
FedEx and UPS stocks went up in response to the news that Amazon is out of the 3PL shipping game (for now). However, it’s difficult to tell just how much the companies will be affected, and what will happen if the pilot program is resumed once the pandemic lets up.
In addition, ecommerce retailers who currently use Amazon Shipping will have to make a choice before the June deadline: find another 3PL provider or try to handle shipping themselves.
Businesses choose to outsource fulfillment to 3PL partners for a variety of reasons, many of which are amplified due to the coronavirus pandemic — warehouse space, fulfillment speed, and workplace safety are of particular concern.
With the added stress and complexity of running a business amidst a global pandemic, switching 3PL partners (or handling shipping in-house) is a daunting proposition.
Whether or not they’re affected by the Amazon announcement, ecommerce retailers will need to carefully examine their logistics strategies and weigh their options more carefully than ever before.
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