Should Amazon Be Broken Up?

We had been planning a road trip for some time to be our semi-return to normal. We started out on June 8 and drove to DC to spend a few days with some friends. From there through MD and VA, TN, and into the NC mountains for a stay with friends from FL. Then on to the bottom of NC to stay with other friends. From there through SC and GA to FL for most of a week to visit with daughter and family who flew in from CO. It was a long haul back through GA, SC, NC, VA, PA, NJ, NY, and on to CT.

Our beautiful country is under vast reconstruction. Each Interstate had significant efforts underway. Combined with heavy traffic, it made for very long drives with occasional welcome stops to charge the Tesla. I wrote a story about the pluses and minuses of the Interstates in 2002, “Do We Need the Interstate Highway System in America?”. If interested, you can find it here.  

In addition to the construction delays, a hazmat accident which shut down I-95, some heavy rain, there was another factor which added to the stress of driving, trucks. A lot of trucks. Many were familiar trucking brands: FedEx, Old Dominion, Schneider, Swift Transportation, UPS Freight, and XPO Logistics. The newcomer was Amazon Prime. They were in every state on every Interstate going in both directions.

The record number of Amazon-branded trucks on the road shows the latest sign of the major expansion of the tech giant’s delivery operation. The Amazon fleet of tractor-trailers now exceeds 20,000. This strategic move is part of the plan to facilitate one-day delivery as its new shipping standard for Prime. They now offer one-day delivery on more than 10 million items.

Business Insider reported it has seen a fleet of Amazon-branded tractors, the vehicles that pull the trailers. This likely signals a move to pull more of the company’s multi-billion-dollar transportation cost in-house instead of contracting with third parties. Using their own drivers could help them get tighter control of the shipping process to meet customer demand.

In addition to the 20,000+ tractor trailers on the freeways, Amazon has a fleet of 30,000 Amazon-branded vans making hundreds of stops a day in the neighborhoods of America. The company has ordered 100,000 new electric delivery vans from Irvine, California based Rivian, the startup automaker in which Amazon has invested $700 million to make sure Rivian can deliver the vehicles. Where do all the trucks take and pickup shipments? The answer is in the Amazon fulfillment network which is made up of state-of-the-art technology and a variety of building types and sizes to support processing orders.

Amazon operates more than 175 fulfilment centers around the world with more than 150 million square feet of space, the majority located across North America and Europe. What they call sortable fulfillment centers are around 800,000 square feet in size and employ more than 1,500 full-time employees in these buildings who pick, pack, and ship customer orders such as books, toys, and housewares. The employees are assisted side by side by tens of thousands of Amazon robots. Another kind of fulfillment center is called non-sortable, ranging in size from 600,000 to 1 million square feet and employing more than 1,000 full-time employees. These centers pick, pack, and ship bulky or larger-sized customer items such as patio furniture, ladders, outdoor equipment, or rugs.

What Amazon has created is slick. Congress thinks too slick and want to break them up. A logical way to do this would be to separate the logistics fulfillment business from their retailing business. One of the complaints about Amazon is some say they retail an item for a third party and if it is successful, they use the data about the product and create their own private brand version of it. Amazon denies it but if true this could lead to action by congress. My view is if Amazon breaks a law or antitrust provision of any kind, they should be held accountable, fined, or restrained. Otherwise, I suspect they will outsmart Congress. When Congress broke up AT&T, customers did not care. They didn’t really like AT&T. They tried to break up Microsoft and IBM and got outsmarted. In the case of Amazon, the customers love Amazon Prime so public opinion, which can be powerful, may win the day.