WJ,

You read my post correctly. It appears I did have a misconception of Amazon’s current usage of its air network. Not withstanding that, my guess is that they will do as you say and try to build a next day capability. It makes sense to do so after FEDEX declined their business and UPS has begun jacking up the rates of high volume shippers. Even so, the question Amazon execs will have to answer is do they want to build a network able to handle all of their own volume plus some outside volume or do they merely want to be able to handle most of their own volume and push the overages to UPS, USPS, etc. I suspect that they don’t see being a logistics integrator for other businesses as part of their long term strategy, but only time will tell. There is room in the US market for a third major player. If they do choose to go after this market they may decide the costs of building an in-house airline are preferable to the inherent inefficiencies of managing subcontractors.

Again, one problem with that theory.

They already have a unionized work force in several countries overseas. Historically, they are very allergic to their US workforce unionizing, but I don’t think that will be the determining factor. My fortune telling skills are shaky though.

I respectfully disagree with that notion. If they were only in air business to save money but not making profit then why they try to get into third party shipping and not just stick with their own logistics.

Maybe to try and "catch lightning in a bottle" a second time as they did with AWS by selling off excess capacity which then turned into what it is today?

There is no lightning in that bottle. Just an unremitting grind of keeping a distribution network running. It’s every bit as capital intensive as AWS, but with far lower (but potentially healthy) profit margins. That said, Amazon went something like 20 years before it made its first profit. That was largely due to continuous reinvestment into the business. Maybe they will do that again, but I don’t think investors will be as patient of the reward is to be the next UPS. It’s just not sexy to Wall Street and Bezos is no longer running the company.

Amazon Fulfillment has for a long time offered its services to other than in-house customers (i.e. Amazon). The whole Marketplace thing is a way of expanding scale, and driving down its own unit cost of stuff that Amazon itself sells and ships. It also was designed to make Amazon the first place people checked to see if they could get Product X shipped to them. And Marketplace has been around a long time and is more than half now of what Amazon fulfills. Only one thing I had to teach my family: if it's SOLD and shipped by Amazon, it's likely being sold at a fair price; if it's only being shipped by Amazon, or not sold or shipped by Amazon, BEWARE; the price/service combo may not be what it would be if it were an Amazon sold/shipped product. Other than that, Amazon is a pretty-seamless marketplace.

So with that background, Fulfillment by Amazon is obviously a big part of their operation, driving scale, driving down unit costs. And FBA has tried a whole boatload of ideas to expand its presence in the marketplace. One aspect of that is what they call MCF -- multi-channel fulfillment, which basically means that whatever channel you use to sell, Amazon handles the storage, picking, packing and shipping. Some people want to sell on Amazon but ship and store the stuff being sold on their own website or other channels separately. That's certainly doable. But, if not, MCF lets you sell on Amazon, your web site, and/or a third party (e.g. Shopify, WooCommerce), and customize what the customer receives with Amazon doing all the work. So, for example, if you sell partially on your web site but do all fulfillment through Amazon, and you use BigCommerce as your back end, you probably don't want the customer to receive a box that says Amazon all over it. That's okay; FBA will do that. You can even set it up so that they won't do the final mile through AMZL, but instead through another carrier. Amazon is happy to be in the center of the fulfillment space, even if your customer never knows that they're doing the whole thing. One thing that Amazon also does that some folks like is to charge you a single combined fee per item that includes picking, packing and shipping (meaning they cover the "postage", too). (You also pay a small fee every month for storage; i.e. warehousing, like a nickel or so per item.) Amazon is trying to be very-flexible with their offerings so they become the fulfillment provider of choice. Thousands of sellers use them in this way, thousands like to do it another way. The beauty of competition and freedom.

So the BigCommerce integration thing is interesting, because BigCommerce is a highly-regarded provider, but if I understand it correctly, that venture isn't really doing much more than use the MCF feature of FBA. It helps BigCommerce because it makes using FBA seamless, while retaining the BigCommerce customer's ability to use BigCommerce to do fulfillment another way. Amazon Air is part of FBA's ability to move stuff longer distances, and certainly smaller sellers don't have the inventory to spread around to as many near-customer FCs as would, say, Samsung, and so it may end up being an important component of what FBA provides to smaller sellers -- the ability to get that product to the person in two days affordably because FBA can put it on Amazon Air, even though it's across-country from the purchaser.

This isn't an area I have really-in-depth knowledge about, but that's how I understand it.

Personally, I like where they are now: they do provide a lot of logistics and shipping to other businesses, and want to do more, but the key is they're focusing on business shippers and -- importantly -- on carrying stuff that Amazon boxes up and labels in its own facilities. That gives them knowledge of the contents (important for safety) as well as control over package size, space waste, proper labelling, addressing, etc., which are luxuries that FedEx and UPS don't have. If I were Amazon, I would shoot myself in the head before becoming an integrator that will carry anything that a member of the general public would bring to me, like FedEx, UPS and DHL do. Blecch. So much hassle, for so little return, even if the rates that the general public pays are higher. As an example, have you ever seen how much space in a box Walmart often wastes? Compare a typical Walmart-packed box to a typical Amazon-packed one. Amazon obsesses about size, shape, weight, composition of packaging; Walmart less so. What's the difference? Walmart's folks are packing boxes that will all be hauled away by others; they are incentivized differently than a shipper that is also a carrier.

Not to say they won't try being more of a carrier to the world, but I like the space they have carved out for themselves now.

I do think that they're never going to try to bring it all in-house. Just the lower-hanging fruit, although they are definitely moving up the tree. There are places in the US that it just makes more sense to serve through carriers that are already going there, given the volume they do or don't generate.

And remember, guys, this wasn't originally about saving money. It was about having control over their reputation and destiny. I think the senior folks at Amazon were horrified to realize the full extent to which they were entirely-dependent on others not to destroy their reputation for reliability and quality, when UPS screwed them one year by deciding not to deliver on Christmas Eve or Christmas Day after an operational meltdown, and sent their folks home. Amazon paid out a kazillion dollars to ****ed-off customers who didn't care that UPS screwed up; they blamed Amazon. This whole thing started because Amazon wanted control over at least a little of its destiny, and it has ramped up and up. If President Trump hadn't tried to screw Amazon at the behest of his real-estate buddies by trying to push up USPS rates, when USPS was the primary last-mile provider, I don't think Amazon would have forayed as heavily into last-mile itself. USPS was doing generally a very-good job, and appreciated the business. Try to say Amazon was taking unfair advantage of USPS? Okay, we'll do it ourselves instead. Sorry your revenue from us will now be cut dramatically. Really unfortunate for USPS and its employees.

On the discussion about whether they'd take the air ops in-house, I think that will only happen if the egos of certain folks in Seattle are able to persuade powers that be that they should be running an airline. It's not rational, but neither are most folks who want to start an airline. Presumably, smarter heads will prevail, because it's an insane idea. But assuredly there are folks Amazon hired along the way who are dying to have it have an in-house airline, regardless of whether it makes any sense, which it doesn't. ABX, ATI, Sun Country, Atlas and Southern are doing a good job, so the airline work is being left to airline professionals.

In other places, I have noted how the way Amazon structured this financially was smart. That is, they put the capital risk (a gargantuan commitment) on Amazon, through long-term dry lease contracts with no outs, and the operational performance risk on the carriers, who can readily be replaced in whole or part if they don't perform. This is the optimal and fairest placing of risk for both parties.

I don't disagree with that, but I think it's an important consideration that DHL, which has vast experience in that space all around the world, tried it and failed miserably. Yes, there were some significant and identifiable missteps that DHL made, of which I have long been very-critical, but their experience -- losing billions of dollars in the end -- is a cautionary tale.

I appreciate your enthusiasm and obvious time spent digging into how Amazon does business, but you seem to have lost sight of how Amazon is manipulating its subcontractors to depress wages for workers. Sure it enables higher profits for Amazon, but ultimately it will bite them in the ass since nobody outside of corporate HQ will have a strong vested interest in company profitability. The advantage to a well paid workforce is that they want to keep the good times rolling and will go above and beyond to make the system work. A poorly paid workforce will be perfectly happy to watch the whole thing collapse under the weight of unrealistic expectations.