Amazon takes vertical integration to a new level

Amazon has just launched its own delivery service in Los Angeles and will do so soon in more cities. Shipping with Amazon will compete directly with companies such as UPS or Fedex, offering other companies delivery services. The announcement sent the shares of the two companies down in the market.

Amazon has been obsessed with vertical integration since its inception. The company’s strategy has been to develop products that meet its customers’ needs, optimize them to the limit, and then offer them to third parties to make their development and operation profitable. It did this with its warehouses, which initially it hoped it could avoid having: Bezos originally believed that he could simply place orders with publishers and book distributors and get them to send books to customers, but when he realized they couldn’t meet deliver on time had no choice but to set up his own. After establishing very high levels of operational efficiency in its warehouses, Amazon then offered companies the chance to store their products there, as well as using the company’s picking and packing services. Finally, Amazon began working on delivering fresh products, developing its own fleets of vans and personnel.

Offering its own logistics services is simply another logical step in Amazon’s vertical integration process. Once a company reaches a certain level…