How Amazon quietly built a shipping operation that rivals UPS

It didn’t stop there. The e-commerce giant leased 12 Boeing 767-300 cargo aircraft, bringing its air fleet above 80 jets. It added 220 package facilities since the start of the year, ranging from urban delivery stations to giant warehouses, according to an industry consultant.

Amazon used the crisis, when prices on everything from commercial real estate to cargo jets plummeted, to amass an empire already beginning to rival the U.S. operations of United Parcel Service and FedEx, long the most dominant logistics companies, which helped the e-commerce giant get its start. But its ambition reaches well beyond delivering parcels to its own customers, according to former Amazon executives. The company is building a logistics system to one day deliver packages for customers to compete directly against UPS and FedEx, something it’s already doing in the United Kingdom.

“They are building the world’s biggest package-delivery company,” said David Glick, a former Amazon logistics executive who serves as chief technology officer at Flexe, which helps retailers warehouse and deliver goods. “If you believe the carrier network is tapped out today, and it is, there is no other option.”

Amazon said on a recent earnings call that it boosted its fulfillment capacity — the collection of warehouses, delivery stations and drivers it uses to get packages to customers — by 50 percent this year, helping fuel $30 billion in total capital spending.

While Amazon’s move into shipping its own packages and freight has been building for years, the implications will provide it a stark advantage this holiday season, when Amazon’s rivals will probably wrestle with getting packages delivered by a network already clogged with pandemic shopping.

That will probably hand Amazon a massive advantage in a holiday season in which U.S. e-commerce purchases will climb 35.8 percent to $190.5 billion, according to a forecast by the research firm eMarketer.

(Amazon chief executive Jeff Bezos privately owns The Washington Post.)

When the pandemic started, there were few e-commerce companies that seemed less prepared than Amazon. It went beyond just logistics. Warehouse staff around the globe sounded alarms that company policies put their health in jeopardy. Rogue third-party sellers gouged buyers on such hard-to-find items as hand sanitizer and listed products making dubious claims about virus protection.

Meanwhile, shipping delays led customers to gripe about third-party sellers at the highest levels ever. The clogged network, and the new hurdles caused by the pandemic, led Amazon to throw gobs of money at the challenge. It sped up spending it had planned for next year on acquiring new warehouse space, to supplement a logistics network straining under the weight of pandemic-fueled shopping.

“We are erring on the side of having too much capacity,” Amazon’s finance chief, Brian Olsavsky, said late last month during a conference call with analysts. Amazon spokeswoman Rena Lunak said the company is ready for the holidays.

Even so, the added surge in holiday shopping could pose a challenge. Olsavsky noted that Amazon’s capacity will be “tight” this holiday season, and that the company

Read more