2014-02-September-Forbidden-City.jpgLast Christmas Eve, Amazon received an early gift in the shape of a patent for "anticipatory package shipping." The patent describes a method for shipping a package of one or more items to an end destination’s geographical area without specifying the delivery address at time of shipment -- the final destination is defined en route. While last Christmas may have been good to Amazon on several fronts, this patent and some other actions it's pursuing indicate how determined Amazon is to expand the already sizable moat between it and other retailers.

Getting Rid of the Middle Man

One of those other activities involves opening 15 sortation facilities across the US this year. Each of these new facilities enable Amazon to exert more influence over the final mile of the delivery process including making Sunday deliveries possible, which no other retailer or e-tailer can currently offer. Whereas before packages would be picked up by either UPS or FedEx at one of their fulfillment centers, many of these will now be delivered by Amazon to the relevant sortation center where they are organized by zip codes and then delivered to the respective post office by no later than 8 am to be delivered the same day.

Beyond facilitating Sunday deliveries through the US Postal Service (USPS) -- currently the only destination for sortation center packages but one would suspect won’t always be the case -- these facilities allow later ordering times for two day delivery, up to nine hours for both Prime and regular customers who pay extra for the privilege, as well as the ability to hedge their exposure to both UPS and FedEx where they experienced several challenges last holiday season in getting packages to customers on time. Finally, this helps lower shipping costs which is key for Amazon. And the possibility exists it could start delivering directly from the sortation centers, bypassing third party shippers.

Wait a minute -- Amazon could start making its own deliveries and bypass UPS, USPS, FedEx, etc.? While this has been a hypothetical topic of conversation for quite some time, it appears to be emerging as reality. Besides the delivery issues last holiday season, this could in part be driven by UPS’s and FedEx’s move to dimensional pricing after the 2014 holiday season. The net effect of this should be increased shipping costs for most retailers, which means either limits on or the elimination of free shipping and/or higher prices, whereas Amazon has been pursuing ways to lower its expenses over the long haul for the better part of at least a year.