Shop at Amazon, ship with Amazon—even to the Amazon

▶ Company documents describe a global delivery network ▶ Amazon takes “baby steps along a long path”

In recent weeks, speculation has mounted that Amazon.com plans to start a global delivery operation meant to compete with UPS and Fedex. Asked on a Jan. 28 earnings call about reports that Amazon has leased planes and registered an ocean freight business, Chief Financial Officer Brian Olsavsky said the idea was just to supplement the other companies during peak delivery seasons, not replace them.

Internal Amazon documents reveal a far bolder plan. A 2013 report to senior management proposed an aggressive global expansion of the Fulfillment by Amazon (FBA) service, which provides storage, packing, and shipping for independent merchants selling products through Amazon.com. The report envisions a global delivery network that controls the flow of goods from factories in China and India to customer doorsteps in Atlanta, New York, and London. The project, called Dragon Boat, is proceeding apace, according to a person familiar with the proposal. The company declined to comment for this story.

The strategy would pit Amazon more directly against Fedex and UPS, as well as Chinese e-commerce leader Alibaba. Like Amazon, Alibaba is vying for dominance of international e-commerce. That market will top $1 trillion and 900 million shoppers by 2020, according to a June report from Accenture and Aliresearch, Alibaba’s research arm.

As soon as this year, Amazon plans to start a venture called Global Supply Chain by Amazon, the documents say. The intention is that Amazon will put itself at the center of a logistics industry that involves shippers such as Fedex and UPS as well as legions of middlemen who handle transnational cargo and paperwork. By bypassing these brokers, Amazon can gather inventory from thousands of merchants around the world and buy space on trucks, planes, and ships at reduced rates.

Merchants will be able to claim cargo space online with a single click. Amazon will join with third-party carriers to build the global enterprise and then gradually squeeze them out once the business reaches sufficient volume and Amazon learns enough to run it on its own, according to the proposal. Financial services could follow, with Amazon giving loans to merchants,

The bottom line Amazon’s moves into the delivery business suggest that it’s hewing to a 2013 plan to take direct control of its global shipping. processing international payments, and consulting its network of sellers on customs and tax matters.

The strategy echoes Amazon’s move into cloud services, now its fastestgrowing and most profitable division. Amazon never made big proclamations about its cloud operations in the early days, instead marketing directly to software developers. Companies like Hewlett-packard, Dell, and Microsoft largely ignored the threat and have been stuck playing catch-up.

“This is classic Amazon fashion,” says Colin Sebastian, an analyst at financialservices firm Robert W. Baird, who says the company’s logistics operation could become a $400 billion business. “They take baby steps along a long path, which allows some companies that could be disrupted to remain in a sense of denial. Amazon rarely takes one big step forward that shocks the market.”

Amazon laid out its logistics strategy in 2013 after predicting an uptick in the flow of merchandise from its sellers in one country to buyers in another. Access to online shoppers in the U.S. and Europe is its draw for merchants in China and India, and operation Dragon Boat helps close the distance. In the proposal, Amazon said the new logistics business would open cross-border commerce to smaller merchants who otherwise wouldn’t bother trying. That in turn would make many more products available to Amazon shoppers around the world.

Three years after the proposal, there are signs the plan is nearing fruition. In January, San Francisco logistics company Flexport noted in a blog post that Amazon’s Chinese subsidiary has registered in the U.S. to provide ocean freight services to other companies. A month earlier, Amazon considered leasing 20 Boeing 767 freighter jets to control more of its delivery costs, says a person familiar with the plans. “What’s clear,” says Jordy Leiser, chief executive officer of e-commerce analyst Stellaservice, “is that Amazon wants to capitalize on its advantage.”