For the past couple of years, Amazon has trialed last-mile delivery with individuals, in a program called Amazon Flex, and with small-courier companies using "white vans." Both of these initiatives are designed to rival UPS and FedEx.

As Amazon prepares for the holiday season, these programs are ramping up to take on more of the load. But that's not all. Amazon recently launched Amazon Relay, an app aimed at making it easier for truck drivers to make pickups from Amazon warehouses, and is soon to launch a trucking cargo app. All of these services are being trialed internally at Amazon and slowly being turned into platform businesses, specifically services marketplaces.

Amazon Flex: What Uber Rush Aspires To

Amazon Flex lets individuals with cars pick-up packages from an Amazon warehouse and deliver them to customers' doorsteps. Amazon advertises that drivers can earn $18-25 per hour. The B2C delivery model has been tried before by platforms like Postmates, Deliv and UberRush. However, UberRush has been reported to be struggling after launching a couple years ago.

UberRush also focused on small businesses as its primary customer. These businesses, like restaurants, would use UberRush to deliver products to their customers. Postmates is different. The customer places the order through Postmates and pays Postmates the delivery fee.

Amazon Flex can subsidize the cost of the B2C delivery model to small businesses with its own package volume. As Amazon Flex gains a more public presence, it's rumored that Amazon will let other small businesses use the program for their own needs. However, the cost structure is completely different if a driver is already on a scheduled route to deliver Amazon's packages and is adding incremental volume from small businesses.

Amazon's Trucking Apps

Amazon Relay is primarily for internal use and will likely not be opened up as a stand-alone platform. It helps trucker drivers coordinate their drop offs at Amazon warehouses. The app makes this tedious process more organized and efficient. However, the app also will prove to be a great learning experience for Amazon in advance of the rumored release of Amazon's cargo delivery app for truckers.

Uber Freight launched in May of 2017 and began a national roll-out just a few months after launch. The service provides a seamless booking process for truck drivers to accept freight delivery jobs similar to the Uber process for passenger drivers. Uber Freight also provides driver benefits like payment within a few days of completing a job when the industry norm can be payment after a month or more. For this reason and others, Uber Freight seems to be making good progress.

Amazon's competing app should be coming out soon and will probably follow a similar process of leveraging the existing demand from Amazon's routes as we have seen with Amazon Flex.

Act as a Consumer

One of the hardest elements of building a successful platform is the chicken and egg problem. Existing businesses have an advantage in launch a platform because they can act as the producer or consumer at launch to seed the marketplace with liquidity. In Amazon's case, it is acting as a consumer for both individual delivery drivers as well as truckers.

As Amazon builds a fluid network of producers (drivers), it can scale its network by opening the service up to other customers. If not opened up, this would still be considered a linear business; however, platforms like Amazon are masters at building new platform businesses on top of its core modern monopoly: the product marketplace.

Just like Google built platform moats around its modern monopoly in search. Google built Android, YouTube, Gmail and others which leverage Search's advertising network and protect the business that drivers over 95% of Google's profits.

As Amazon expands further into logistics, it seems to be heading down a similar path.

Published on: Nov 19, 2017