Amazon could launch third-party delivery service in U.S. by 2021, Morgan Stanley says

Mega-retailer amazon.com's in-house parcel delivery arm is on track to be roughly the same size as FedEx Corp. in the U.S. by 2020 and as big as UPS Inc. by 2022, an executive at the investment bank Morgan Stanley said in a conference on Wednesday.

The Amazon Logistics division is riding a wave of huge parcel sector growth that was already simmering before the pandemic, and has since boiled over as coronavirus factors have compressed three years of predicted growth into a six-month period, Ravi Shanker, executive director at Morgan Stanley, said in remarks at the virtual Parcel Forum trade show.

Seattle-based Amazon is currently stocking that swelling network purely with its own packages, handling increasing volumes of deliveries through its in-house capabilities as opposed to paying FedEx, UPS, or the U.S. Postal Service to carry them. But as its internal logistics capabilities grow, Morgan Stanley is predicting that Amazon will likely launch a third-party delivery service as soon as 2021, Shanker said.

In fact, Amazon already launched a “logistics as a service” arm in the U.K. in May of this year, and will probably follow a similar pattern in the U.S. once the country begins to emerge from pandemic restrictions, he said.

“The world is a different place and probably very few other industries have seen the impact brought on by the pandemic as much as the parcel industry,” Shanker said in a statement. “In December of last year, we estimated that by the end of last year, Amazon was moving about half its own packages in-house. That was double a year before that and we’ve already seen a bunch of industry reports pointing to Amazon moving about two-thirds of its own volume in-house by July/August of this year.”

Amazon’s expansion comes as parcel volumes have surpassed 100 billion worldwide and carriers such as UPS, FedEx, and USPS are straining to find enough capacity to keep up. Combined with the looming holiday peak, that trends means that it has never been more important for shippers to understand their options for ensuring parcel delivery. “We have seen an enormous surge in e-commerce demand and e-commerce volume as a result of the pandemic. In 2020, Morgan Stanley’s Internet team expects e-commerce volumes to be up over 40% [year-over-year] coming off a mid-teens steady growth rate over the past 4 years,” Shanker said.

That growth rate will probably subside as people someday emerge from pandemic lockdowns and return to work, school, and brick and mortar stores, he said. But a softer growth rate in business-to-consumer shipments will likely be supplemented by a return to higher business-to-business volumes as stores re-stock, so total volumes may remain about the same.

Thanks to that continued overall commerce growth, there is probably enough volume to supply plenty of parcels to all four major carriers—adding Amazon to the traditional “big three” of FedEx, UPS, and the USPS. For example, the USPS is still the most cost-effective delivery option for rural areas, and has the largest delivery network in the country, Shanker said.