Barclays questions Amazon?s logistics plans | Air Cargo World
It's no longer much of a secret that Amazon has been considering creating its own air network in both the American and European markets. But anew report by Barclays Equity Research questions why the online retailer would want to take such as strategy when opening more fulfillment centers would be more cost-effective.
According to Lloyds Loading List, which had obtained a copy of the Barclays report, the study’s authors estimate that by the end of this year, Amazon is likely to have more than 100 fulfillment centers in the United States. Once these fulfillment centers are operational, Amazon will have a nationwide network with meaningful scope, enabling inventory placement to be made closer to consumers in most major cities.
Amazon has been working with several carriers in the U.S. on trial air operations and is believed to have begun the process of setting up its own U.S. domestic air network. It has also been conducting air trials in Europe with charter carrier ASL on a schedule between Wroclaw, Poland; Doncaster, U.K.; and Kassel, Germany – all of which are near existing Amazon fulfillment centers.
The Barclays report said: “Air transportation, especially of goods, is an expensive proposition. FedEx remains the market leader in terms of domestic U.S. air shipments, but financial returns have remained stagnant for over a decade. We know aircraft and airlines drive disproportionate attention from the media; flying is still sexy.”
Barclays speculated that the potential launch of an air operation at the former DHL hub in Wilmington, Ohio, is not necessarily a sign of a new network on the way. Instead, the report called it “a likely experiment” or perhaps a small network designed to meet the inventory needs of a “very specific high-value product.”
Also, the report said, the investment doesn’t pencil out. “With only limited financial returns and plenty of existing air capacity during non-peak periods in the incumbent package networks, we question the need for Amazon to devote the significant capital required to operate a standalone, time-definite air network.”
Barclays added that this was likely to be “less impactful in the long run, relative to local fulfillment center build-out.” The report said that one of the keys to Amazon’s success was its ability to continually build out its distribution infrastructure.