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Business Impact

Uber and Amazon Want to Muscle In on the Shipping Industry

Whether it’s food delivery or hauling freight, tech giants think they can move stuff better than the old guard.

The shipping industry is large, complex, and relatively unchanging. So it’s perhaps only natural that tech companies are eyeing it as a sector ripe for innovation.

Amazon’s most famous shipping aspirations are, admittedly, airborne. It’s desperate to develop a drone delivery service, and it also leases 40 Boeing 767-300 cargo airplanes to air-freight goods. But the company is used to moving stuff around on the ground, too. It has thousands of tractor-trailers that it uses to ferry its inventory between warehouses, and it’s been experimenting with an Uber-style network called Flex that allows people to deliver packages for it in order to make a buck.

But according to a report by the Wall Street Journal, Amazon’s ambitions go far beyond its current logistics operations. Despite much protestation by Jeff Bezos that Amazon isn’t seeking to supplant the likes of UPS and FedEx, the newspaper cites over 20 past and present executives from the company as sources confirming that its plan “is to one day haul and deliver packages for itself as well as other retailers and consumers.”

According to those sources, Amazon seeks to build a more flexible kind of shipping service with, for instance, out-of-hours deliveries. Its desire to decrease reliance on established delivery firms is understandable—in 2015, it spent 10.8 percent of its sales revenue on shipping. Building a UPS or FedEx rival from the ground up is surely complex and expensive, but Citigroup estimates that it could save it as much as $1.1 billion per year.

Amazon isn’t alone in eyeing the industry. Uber also has plans to move more than just people. It announced on Wednesday that it was massively expanding its Uber Eats food delivery service into 22 new countries around the world. It currently serves just six.

But perhaps more interesting from Uber is the news that its newly acquired self-driving-truck startup, Otto, is set to expand its fleet of vehicles and start hauling freight to warehouses and stores next year. The move will help Otto test out the autonomous-driving systems that it’s developing in more realistic situations, as well as allowing Uber to experiment with another kind of shipping. According to Reuters, the long-term plan is to “compete with the brokers who connect truck fleets and shippers.”

As Farhad Manjoo recently pointed out in the New York Times, autonomous 18-wheelers are very much a live issue. They’re likely to make a widespread appearance on our roads far sooner than fleets of self-driving cars, and when they do, they will have a profound economic impact. With trucks that can roll autonomously all day long, jobs will be lost by some and fortunes made by others.

Uber knows that, and Amazon is aware that its own logistics wing could allow it to assert its dominance in retail even further. Both organizations are approaching their plans as any self-respecting Silicon Valley company would, with confidence that daring business models and large investment can successfully upend the incumbents. They may yet deliver on that goal.

(Read more: Wall Street Journal, Yahoo, Reuters, The New York Times, “Uber Is Betting We’ll See Driverless 18-Wheelers Before Taxis,” “Self-Driving Trucks May Hit the Road Before Google’s Cars,” "U.K. Signs a Deal with Amazon to Test Delivery Drones”)

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