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Illustration: Sarah Grillo/Axios

With robots that can pack orders, an ecosystem of delivery helpers and a fleet of trucks, Amazon is building a shipping juggernaut.

Why it matters: It's not as glossy as space travel or as flashy as AI, but the $1.5 trillion per year business of moving stuff around is one of the most lucrative and complex industries in the U.S. And Amazon is attempting to conquer it.

As we've reported, Amazon has signaled its intent to own shipping:

But unlike e-commerce, where Amazon takes more than half of every online dollar spent in the U.S., logistics is filled with worthy competitors that have dominated the industry for a century and won’t be easy prey.

  • In shipping, FedEx and UPS control the majority of the market, with 22% and 40% shares, respectively.
  • They have mighty forces to move a combined 20 million packages on a typical day, including a fleet of 160,000 cars and trucks all together, along with 900 planes.
  • And there are dozens of smaller players: In warehousing, for instance, DHL and XPO Logistics have sophisticated robotized operations, per a McKinsey Global Institute report.

Although Amazon has "been a big disrupter in other industries, I don’t think that they are going to be a major disrupter in the transportation industry," says Beth Davis-Sramek, a professor at Auburn University.

Look for out-and-out war: If Amazon strengthens its network and stops relying on the big shippers, UPS and FedEx could lose one of their biggest customers, hurting their bottom line. And smaller firms could pick Amazon over them, too. These companies are not going to roll over on their tummies.

  • UPS tells Axios: "Amazon is a good customer, but e-commerce offers many opportunities beyond Amazon. ... We’re building innovative solutions and partnering with e-commerce leaders to serve small, medium and large businesses around the world."
  • FedEx responded: “While there has been significant media interest in what Amazon is doing to expand their in-source delivery capability, this should not be confused as competition with FedEx."

What's happening: The rise of online retail — and customer demand for speedy delivery — has supercharged the U.S. shipping industry.

  • Despite the massive volumes, shipping remains costly. For every $100 in sales, e-commerce companies spend about $20 on logistics, McKinsey reckons.
  • E-commerce's growing share of U.S. retail will put even more strain on shipping.

To keep up with the fast growth, companies large and small are pouring money into automating logistics, betting that firms that use machines to make deliveries cheaper, faster and more accurate will hit the jackpot.

"The idea is to build the physical internet," says Julian Counihan, founder of Schematic Ventures, an investment fund. "Boxes become bytes that move throughout the supply chain network as seamlessly as data."

The big picture: The logistics industry employs around 15 million people and has the third-highest automation potential of any sector, per McKinsey.

  • This week, Amazon made significant headway with new robots that can box up items, reports Reuters. These machines are beginning to make Amazon more efficient.
  • Still, human labor is required to complete some of the most crucial tasks: handling individual items, picking products off of shelves and arranging them in boxes.

What to watch: The e-commerce giant has long offered shipping to the merchants selling on its site through Fulfillment by Amazon, but it hasn't been able to offer the service at a cheap enough rate to attract big-volume customers, says Ashutosh Dekhne of McKinsey Global Institute. Driving down costs through automation could change that.

But even if Amazon becomes the cheapest and fastest shipper in the country, big retailers may still choose to work pure logistics companies like DHL and XPO, Counihan says.

  • "Amazon is in a unique position in that no other third-party logistics provider also competes with their customers," he says. If retailers that don't already sell on Amazon let the tech giant handle their shipping, they risk handing over valuable data on which products are selling to which markets — information that Amazon can use to sharpen its own retail business.

Go deeper

Updated 3 mins ago - World

Trudeau's Liberals set to form another minority government in Canada

Canadian Prime Minister Justin Trudeau. Photo: Jeff Vinnick/Getty Images

Canadian Prime Minister Justin Trudeau's Liberal government was reelected for a third term in Monday's parliamentary elections, but preliminary results show it failed to win a majority.

Why it matters: Trudeau has governed Canada with a minority of legislative support in parliament for the past two years. Last month, he called for an election two years earlier than scheduled in the hope of forming a majority government.

2 hours ago - World

Reports: CIA director's team member reported Havana Syndrome symptoms

Central Intelligence Agency (CIA) director Bill Burns during a House Intelligence Committee hearing in April on Capitol Hill. Photo: Al Drago-Pool/Getty Images

A member of CIA director Bill Burns' team who traveled with him to India this month was treated for "symptoms consistent with Havana syndrome," CNN first reported Monday.

Why it matters: Current and former officials told the New York Times the incident signals a "possible escalation" in the mysterious neurological symptoms affecting as many as 200 Americans who've worked in overseas posts since 2016.

Pelosi's back-to-school math problem

Illustration: Sarah Grillo/Axios

House Speaker Nancy Pelosi (D-Calif.) may need votes from an unlikely source — the Republican Party — if she hopes to pass the bipartisan infrastructure bill by next Monday, as she's promised Democratic centrists.

Why it matters: With at least 20 progressives threatening to vote against the $1.2 trillion bipartisan bill, centrist members are banking on more than 10 Republicans to approve the bill.

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