Former VP, Amazon Logistics Europe
Philippe has spent over 25 years developing end-to-end logistics systems from vendors to customers, including 18 years at Amazon.com. He joined Amazon in France in 2000 as Distribution Centre General Manager, moving to Amazon.co.uk (Scotland) in 2004, to support business growth within the UK. Philippe then took up several senior leadership positions in European Operations at Amazon EU Headquarters in Luxembourg, culminating in the role of VP Amazon Logistics Europe from 2015-18. Before joining Amazon, Philippe worked for Danzas (now DHL) in France. Throughout his career he has worked on network modelling, procurement and buying processes, inventory management, fulfillment management, and transportation network management. Since March 2018 Philippe has run his own consultancy business, holds several board positions and teaches Supply Chain Management and Global Logistics Strategy at university. Read moreView Profile Page
I suppose, the next step could be non-Amazon vendors or customers or outside customers, to increase that?
I don’t think so, because FBA comes back to the philosophy of Amazon. Amazon does not do logistics because they’ve found it to be the most profitable business on earth, because the most profitable business on earth is called cloud computing. Therefore, Amazon just do logistics because that’s an enabler of business and retail. You need to think about the fact that Amazon do it if they can first benefit from it, as a retailer. Secondly, when whatever they had could help what they do for their retail business, to lower the cost, particularly, and enable a service. The max optimization of a fulfilment center is the box that Amazon is growing now, which is between 80,000 to 100,000 square meters. Those are the big fulfilment centers that have deployed. In the US, they are slightly bigger, because there is space and in Europe, slightly smaller, and in Japan, as well. But they are an optimal size for a fulfilment center that, when you fill one, there is no benefit from having other one. You need to start from scratch. You need to have a new director of the fulfilment center and an entire structure.
Therefore, there is no scaling effect of that. In that case, why would they start opening fulfilment centers to give to others? They would give others the fulfilling excellence that Amazon is able to provide, with no other benefit. You can charge for excellent fulfilment, but it would, mostly likely, be more expensive than 3PL. It would, maybe, be done better but, most likely, more expensive. I think, as well, if you are a real competitor of Amazon, you’re not selling on Amazon. Why would you give your competitor your logistics and be depending on him? That makes no sense. It’s the reason why I don’t think that Amazon will.
What Amazon has done, historically, was for example, worked with sellers who were selling on Amazon and wanted to do FBA, but have their own website. You didn’t want to split your inventory. Amazon went back into that, because when it started, it was very frequent that we could ship the order from your own website. It’s still being done, for historical sellers, but it’s not offered everywhere, on every website, anymore. Again, it’s not something that Amazon are willing to do too much. I would say that Amazon will not step out and start to just do logistics, because that makes no sense, because it makes no sense to do that directly, if it doesn’t benefit their retail business.
When you see them moving into the Amazon Freight business, that’s because it reduces the cost for their internal business?
Exactly. Transportation, that’s different. Fulfilment is a smaller-sized business optimization. Any kind of transportation, it’s very, very large and the more you bring, you can optimize. If you want to fill something with a container, but you are not able fill it completely, you have leverage to negotiate the price. In that case, you might want to take other product to fill it, because you will lower the cost for you and for the other party and there is a benefit. The last mile is exactly the same situation. The more you have a certain density, the better your costs will be, in delivery. You are better to aggregate other volume, when you have not yet reached the density which is the best for the ROI. It is the reason why, yes, in that case, the slight difference will be that Amazon open, if there is an opportunity to take advantage of lowering its own costs, by doing so. In that situation, then it might be a way for having lower costs in distributing their own product and that benefits their retail business.