Amazon (AMZN) purchased a 25% stake in the French company in 2014 and is now buying the rest.
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Amazon has become a household name due to the dominance of its colossal online store. But Amazon hasn’t said what its long-term plans are for Colis Prive, and analysts believe that this is another move from the online giant in preparation for entering the shipping business.
Although Amazon’s shipping and delivery processes have increased in efficiency since then, the company’s shipping costs have increase by approximately 30 percent each of the past two years. Many in the retail industry expect that Amazon would even allow third-parties to use its eventual global shipping service if there is excess capacity. And it’s out of the question for Colis Privé to only deliver for Amazon. However, the acquisition of the company signifies Amazon’s intention to eventually start delivering its own goods, and maybe even packages from other retailers, according to Tech Spot.
Amazon acquired the right to purchase 4.2 percent of United Kingdom parcel company Yodel in 2014, and has recently added thousands of trailers to its fleet in order to meet increasing demand. Like the route in which Amazon made its distributed computing arm AWS a business, Amazon could likewise choose to handle shipping for different organizations. The costs are increasing every year as Amazon tries to further enhance its delivery system to better compete with rivals.
But what if Amazon could turn that expense into a profit center?
“There is a lot for them to prove with the market opportunity”, Sebastian said.
For their part, both UPS and FedEx have said little about the possibility of having one of their largest, if not the largest, customers as a competitor.
Amazon’s last 12 months price to earnings is 885 times, versus 34 for FedEx and 21 for UPS.
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“Given the scale of Amazon’s own first and third-party retail operations, we believe there are potential efficiency gains from internally operating fulfillment, logistics and delivery, as well as service benefits of controlling the full customer experience”, Colin Sebastian, an analyst with Baird Equity Research, told Fortune. “That’s not likely to change in the foreseeable future, as these networks are very capital-intensive and information-intensive”.
