By now we have all been overrun with this news, Amazon is leasing 20 Jumbo Jets. This follows early December reports about Amazon purchasing “thousands” of semi-trailers. We have been told how this bold and strategic move by Amazon is going to disrupt both UPS and FedEx, which by some accounts represents about $8.6 Billion in annual expense. I am certain it will…but is this just the tip of the iceberg?

Is Amazon Plotting an Air War on FedEx?

Amazon Buys Thousands of Its Own Truck Trailers as Its Transportation Ambitions Grow

More interesting to me is what this might signal in the ongoing battle between Walmart Stores and Amazon in the battle for eCommerce dominance. 

Walmart’s early supply chain strategy has paid off over and over again. By operating as a world class distribution and logistics company they have ensured sustained cost advantages, being able to deliver a pound of anything to any 5 digit zip code more efficiently than anyone else. It is a truly amazing great strategy and execution…or at least has been.

Amazon’s strategic moves could suggest the desire to create a similar type of competitive advantage in the new battle ground of home delivery. By taking control of their total freight movements they could conceivably create a sustainable cost advantage for delivery to the consumer’s doorstep. It seems reasonable they would want to replicate the type of strategy which has made it almost impossible to compete with Walmart head to head on retail price. 

Assuming Amazon moves forward with this strategy both at home in the USA and abroad it would seem the battle line has been drawn. Walmart has made some savvy strategic moves of late, in particular with their OmniChannel strategy. This reveals the importance to Walmart’s financial model for consumers to ultimately take delivery of the goods at the physical stores. Walmart has built significant assets in real estate, these simply cannot be operating under capacity.  Therefore, they must continue to keep the consumer leveraging the stores. If successful in this, they will continue to reap the benefit and enhance their supply chain advantage.

Amazon is betting big on supply chain also. However, they are tackling from a different consumer perspective. They believe the consumer wants to have purchases delivered to their residence, saving them time and avoiding frustration. By optimizing their total supply chain (air, marine, and ground) it seems possible for Amazon to recreate a similar structural cost advantage and consumer value proposition that could make it exceedingly difficult for another company to compete, even the world’s largest retailer.

In the end, this may be one of those incredible battles we have often read about, and this might be that decisive moment where insight and strategy truly win the day..and while there are many more battles to be fought, I am left wondering who will win. Will it be Walmart continuing to save the consumer money every single day? Or will it be Amazon redefining the consumer value proposition by saving the consumer two incremental valuable commodities — their time and patience?