Amazon Ramps Up Its Own Delivery Service

Amazon Logistics provides shipping services to third-party sellers regardless of the sales channel. The program, called Multi-channel Fulfillment, is available to merchants who use Fulfillment by Amazon.

On June 1, Amazon increased MCF fees by an average of 3 percent. The company also added an option for sellers who operate on other channels from being shipped by Amazon. The fee to opt-out is 5 percent of the order. Thus participating merchants can decide where to use the MCF service.

How MCF Works

Other platforms and channels — including Shopify, WooCommerce, Etsy, Magento, Wish, and 3dcart — allow API access to Amazon Logistics, facilitating the integration. With MCF, inventory is stored at an Amazon fulfillment center. The program has different pricing, service levels, and support from FBA. Namely, MCF is more expensive than FBA and does not offer returns or international shipping.

MCF comes with standard (3-to-5 day), 2-day, and 1-day shipping.

Sellers can block shipments from Amazon Logistics in two ways: (i) at the FBA account level, which applies to all MCF orders, and (ii) via Seller Central or API for single transactions.

Why would sellers pay Amazon not to ship products through MCF? Both Walmart and eBay prohibit third-party sellers from shipping orders from their sites via Amazon, mainly because items are shipped in Amazon-branded boxes.

Some FBA merchants do not want to ship via Amazon Logistics because of poor execution. One multichannel seller posted the following comment on Amazon’s Seller Forum about the new policy. “Very happy with this – will gladly pay the 5% surcharge. Lost quite a bit of revenue last year on customers saying they didn’t receive MCF orders that were shipping using Amazon Logistics.”

It’s a testament to Amazon’s clout that it can charge third-party sellers for not shipping products.

Other sellers have complained that Amazon has not met promised delivery times, prompting customer complaints. FBA shipments take precedence over MCF shipments. Amazon stated that MCF is improving delivery times and has added the ability to track shipments through AfterShip, a third-party tracking company.

Benefits to Amazon

• With MCF, Amazon can see what its third-party merchants are selling on other websites.

• The product arrives in an Amazon-branded box, reminding the customer that Amazon had a role in delivery despite the customer having purchased elsewhere.

• MCF bolsters Amazon’s position as a rival to FedEx, UPS, and USPS. In the U.S., Amazon hired an additional 400,000 workers in 2020 to sort, pick, pack, and deliver goods from its domestic warehouses. It leased 12 Boeing cargo aircraft, bringing its air fleet to more than 85 jets. It also added 220 package facilities.

Delivery Partners

Amazon is concentrating internal delivery services on densely-populated urban areas. It leaves rural areas to UPS and USPS. Amazon’s Delivery Service Partner program utilizes independent business owners in the U.S. who, after training and an investment of at least $10,000, hire their own team of drivers that use blue vans with prominent Amazon logos.

Each Delivery Service Partner is responsible for hiring and training drivers and commits to 20 to 40 delivery vans and 25 to 100 employees. Amazon estimates annual revenue potential for each partner at $1 million to $4.5 million and annual profit at $75,000 to $300,000. Amazon claims that the selection process is long and highly competitive. Estimates are that the DSP program has over 100,000 drivers, and it is currently operational in the largest cities of most states.

Amazon’s Delivery Service Partner program utilizes independent business owners in the U.S. who hire their own team of drivers that use blue vans with prominent Amazon logos. Image: Amazon Logistics.

The DSP program is how Amazon intends to compete with FedEx, UPS, and USPS without hiring its own employees. This will keep costs down. In its April 2021 first-quarter earnings presentation, Amazon CFO Brian Olsavsky said the company increased the capacity of its in-house logistics operations by 50 percent year-over-year and expects similar investment levels for the remainder of the year.

Amazon’s objectives are to speed up shipments and make the package delivery process more cost-effective. Olsavsky indicated that Amazon is making progress on that front, saying, “Our [delivery] cost right now is very competitive with our external options.”

International Delivery

Amazon offers a service called Amazon Shipping for U.K. sellers shipping to U.K. customers. The service provides only next-day delivery for items sold outside the Amazon Marketplace. This program could expand to other European countries.