E-commerce giant Amazon.com (NASDAQ:AMZN) is reportedly in the process of leasing Boeing (NYSE:BA) 767 jets in order to launch its own air-delivery service, according to The Seattle Times. Sources say that Amazon is looking to integrate delivery into its own business in order to reduce reliance on third-party carriers like UPS and Fedex, which can sometimes cause delays in delivery times.
Amazon has had talks with multiple aircraft lessors. The company has been testing a small trial operation of delivery service in Ohio with one of these lessors, and leasing an additional 20 aircraft would be a significant expansion. The Ohio test reportedly includes five aircraft jets. Longer term, Amazon may consider acquiring the jets themselves, and may even offer delivery services to other companies.
Does it matter?
Shipping is an incredibly important part of Amazon's business, considering the sheer scale of its e-commerce volumes. So it makes plenty of sense that Amazon would consider vertically integrating this crucial function. Amazon's growth has been a boon to third-party delivery carriers, but at times it can become challenging to meet Amazon's shipment needs.
Integrating shipment services directly would provide Amazon many benefits. By integrating directly, it would be better equipped to avoid delays since Amazon would have more visibility into its expected shipment volumes. Additionally, it would inevitably save on costs as well. Net shipping expenses typically comprise approximately 5% of net sales.
It would be quite some time for this potential delivery strategy to develop, but if Amazon decides to pursue delivery integration, it would realize some important benefits in the long term.
Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool recommends FedEx and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.