Amazon to Pause Third-Party Delivery Service

The Wall Street Journal first reported Amazon is pausing non-Amazon package deliveries at the beginning of June.

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“We understand this is a change to your business, and we did not take this decision lightly,” Amazon said in an email to shippers reviewed by The Wall Street Journal. “We will work with you over the next several weeks so there is as little disruption to your business as possible.”

This delivery service, also known as Amazon Shipping, operates in a handful of cities and competes directly with UPS and FedEx.

An Amazon spokesperson later confirmed the decision to Reuters, “We regularly look at a variety of factors across Amazon to make sure we’re set up in the right way to best serve our customers.”

Another Blow to Amazon’s Operations During Coronavirus Crisis

Initially, Amazon Shipping surfaced as a pilot project under the “Shipping With Amazon” moniker in 2018.

Since then, the company expanded its logistics network with thousands of branded delivery trucks, making some observers believe it will eventually rival FedEx and UPS for domestic deliveries.

Last year, FedEx chose not to renew Amazon domestic delivery contracts in a move mostly seen to avoid supporting a potential competitor. FedEx, for a long time, dismissed Amazon as a potential competitor, but in 2019 changed its tune.

Over the last two decades, Amazon has expanded rapidly by disrupting many industries, throwing vast sums of money at gaining market share.

This has been a successful model for them and investors were willing to accept these investments as they usually worked out in favor of the company.

But it seems the coronavirus crisis has placed Amazon in an awkward position to maintain its operations and is forcing the company to make difficult decisions that favor customer retention versus small businesses that make up so much of its online commerce volume.

Besides pausing Amazon Shipping now, the company already made other operational changes to deal with the coronavirus crisis. Many of these decisions have impacted small businesses severely with heavy cash flow implications.

• Stopped accepting products at its fulfillment warehouses from third-party marketplace sellers for goods not in high-demand categories. The original end date of April 5 has been extended to “until further notice.”
• Next-day and Two-day Prime deliveries have mostly vanished with shoppers reporting delivery estimates of one week or more on “in-stock” items at its warehouses.
• Operational focus on high-demand categories for “faster delivery,” leaving many non-essential items to linger in customer order queues.
• Extended product returns window on third-party sellers going back to orders fulfilled since March 1.

Amazon Weaknesses Exposed

While the coronavirus pandemic is an extraordinary event, it is highlighting weaknesses in Amazon’s logistics operations. This indicates the company was either barely keeping up with demand or unable to scale quickly if necessary.

In social media forums, many third-party sellers are rethinking their allegiance to the company as some of these decisions are hitting small businesses the most.

Diversification of sales channels and using non-Amazon third-party fulfillment services are hot topics among Amazon marketplace sellers.

Many impacted Amazon marketplace sellers that left eBay are considering going back to eBay or other platforms, and Wall Street is taking notice of this potential shift.

Amazon will survive, but it may take years for it to regain the trust it had earned over the last decade as the go-to marketplace for small businesses.

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