Online retailing giant Amazon has observed the birth of the company by celebrating Amazon Prime Day (APD) since July of 2015. The company takes advantage of the mid-summer season which is the slowest shopping period for traditional brick-and-mortar retailers. This year’s promotion began on July 16th at 3 PM Eastern Time and extends for 36 hours through 3 AM Eastern Time on July 18th. During this time, Amazon Prime members can benefit from deep discounts on over one 1 million Amazon products, creating a sort of Black Friday in the middle of the summer.
The transportation and trucking industries are affected by the tremendous quantity of sales that are generated during APD. Amazon has long offered free shipping on orders over $25, but one of the benefits of being an Amazon Prime member is the allure of free shipping on all purchases, and members take full advantage of that fact.
This has led to an increase in the overall shipping costs incurred by Amazon to service its customers. According to marketwatch.com, the company’s shipping costs, which include the expense of transportation and delivery centers, have risen from $11.5 billion in 2015 to $21.7 billion in 2017. This pattern of increased costs is expected to continue in 2018 and APD will certainly be a contributing factor. Amazon has increased the price for new Prime members to help defray their shipping costs.
Amazon has a complicated supply chain that encompasses many interconnected parts in their quest to deliver their products to their customers in a timely manner. Many items that are manufactured in China need to be on hand for APD meaning that in the preceding weeks and months more overseas shipments to their delivery centers are required. Amazon has recently stepped up their use of air freight to supplement their sea-based shipping channels in an effort to obtain goods more quickly and having them delivered closer to the delivery centers from which the goods will be distributed.
Once the products have been transported to the U.S. they need to make their way to Amazon’s sorting and distribution centers. This involves the company’s increased use of trucking services to move their inventory from seaports and airports to the local delivery centers. Due to this surge in Amazon’s demands, it may be more difficult for other corporations to schedule transportation of their goods by truck in the weeks leading up to APD.
Delivery appointments from trucking services can be harder to obtain during the run-up to APD, and companies that may be adversely impacted by this fact need to plan ahead to avoid paying higher fees or having to compromise on shipping dates. Amazon’s warehouses are busy, impacting the time that trucks will wait to unload, putting further pressure on the availability of trucking options. It can become a logistical nightmare when trying to move their products for an enterprise that is unprepared.
LTL is an acronym for less-than-truckload freight transportation. It is primarily concerned with the movement of packages that are too large for a parcel service such as the mail system while not being large enough to be the only item delivered by a truck.
The Amazon Effect refers to the change in shipping practices that grew out of the company’s free shipping and Amazon Prime program. Consumers could now purchase small items that required fast delivery. These packages are often of the size that demands an LTL solution.
This has caused a change in the way shipping companies price their services. No longer can a carrier simply charge by the weight of a package. Many of the items ordered through Amazon weigh very little in comparison to the size of the box in which they are shipped. Companies like UPS and FedEx have had to modify their pricing to handle the way goods are shipped in the commerce world.
Amazon’s first Prime Day was in 2015 when oil and gas prices were very low. The impact of rising prices has forced the vendors that Amazon relies upon to hike the cost of shipping to cover their fuel expenses. Rising shipping costs has also led to Amazon’s creation of its own air cargo network and they are planning their own delivery service that will compete with FedEx and UPS, according to zdnet.com.
The company is also investigating an Uber-like system to match drivers with packages to provide last-mile delivery of their products. While more established shipping companies have benefited from APD and the general surge in e-commerce, they may lose a substantial customer if Amazon’s distribution plans are fully realized.
The fact that APD occurs in the middle of the summer travel season puts pressure on the fuel industry to maintain adequate supplies. As with all commodities, prices will increase with demand, and having delivery vehicles competing with vacationers and airlines for available fuel leads to increased prices for everyone.
So while you are relaxing at home waiting for your APD package to arrive, there are shipping, logistical, and fuel supply issues that can arise from the mid-summer sale. There are costs behind free shipping that are not readily apparent or of a concern to the general consumer. These issues can be extremely problematic for the shipping manager who needs to procure a truck or the small business that needs to rely on a stressed delivery system in the days before and after APD. In these ways, Amazon Prime Day has an impact on many facets of the transportation industry.