Analyzing Amazon’s

Growth Strategy:
How The Tech Giant Is Shaping The
Future Of Transportation And Logistics 2022
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We mined Amazon’s acquisitions and
partnerships to discern the company’s
strategic priorities in transportation
and logistics.

Online retail and tech giant Amazon expects to be the largest

package delivery carrier in the US by early 2022, eclipsing UPS,
FedEx, and the United States Postal Service.

Amazon has been investing and partnering heavily across

transportation and logistics over the last 3 years to expand,
streamline, and optimize its existing operations and enter new
lines of business. Some of these new revenue opportunities
include mobility-as-a-service, grocery delivery, connected vehicle
tech, and other technologies shaping the future of transportation
and logistics.

The company has also been heavily focused on sustainability.

Amazon co-founded The Climate Pledge in 2019 and has since
made numerous investments and acquisitions to decrease its
carbon footprint.

Using CB Insights data, we uncovered Amazon’s 4 most

important strategic priorities as they relate to transportation and
logistics highlighted by its recent acquisitions, investments, and
partnerships. We then categorized companies by their business
relationships with Amazon across these priorities:

• Freight & logistics

• Connected vehicle tech

• In-vehicle infotainment

• Mobility-as-a-service

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Freight & logistics

With billions of parcel deliveries each year and over 100,000

delivery drivers, Amazon cites reducing variable costs in shipping
as one of its main priorities. The company has been focused on
localizing fulfillment to compete with the massive brick-and-
mortar footprint of competitors like Walmart and Target.

To this end, Amazon continues to invest heavily in expanding its

logistics network to move closer to the end customer, reducing
delivery times and fulfillment costs.

AIR CARGO
Amazon is working to expand its capacity for air freight. The
company has built out its own cargo airline, Amazon Air,
specifically for its package delivery business. As of early 2021,
Amazon owns and leases over 70 planes. Some have predicted
that the fleet will be as large as 200 by 2028.

Expanding capacity in the air is a critical step for the company to

improve delivery speed and provide more visibility and data on its
end-to-end logistics operations. While Amazon is only flying within
the US right now, it plans to expand internationally. Long-range
cargo jets will allow the company to import goods directly from
manufacturers in China and other countries.

To address its growing need for planes, Amazon entered into an

agreement with Air Transport Services Group in 2016 to lease 20
Boeing 767 freight aircrafts. ATSG granted warrants to Amazon for
up to 19.9% ownership of the company. In March 2021, Amazon
exercised those warrants at a value of $131.9M.

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Is Shaping The Future Of Transportation And Logistics
Amazon has also invested in and partnered with overnight air
cargo service provider Cargojet. Similar to the ATSG deal, Amazon
acquired warrants in the company and uses the service to deliver
packages between its facilities in Canada.

Building out its air capacity will allow Amazon to continue

to expand its courier services. With its jet fleets growing, the
company could eventually spin off its air business altogether and
operate as an independent courier.

AUTONOMOUS LOGISTICS
Amazon is investing to automate its logistics network to address
labor shortages in the warehouse and on the road, a growing fleet
of trucks, and demand for faster and cheaper shipping.

One aspect of this is autonomous trucking, which will help to

reduce accidents on the road, increase fuel efficiency, and speed
up delivery times. In early 2019, Amazon tested autonomous
trucking shipments with startup Embark Trucks.

Shortly after, Amazon participated in a $530M Series B round to

autonomous driving technology company Aurora, which has also
partnered with PACCAR to develop self-driving trucks.

However, fully autonomous trucks still have several hurdles to

clear before they are ready to be deployed at scale. Amazon has
diversified its strategy in this realm by ordering 1,000 trucks and
purchasing warrants for up to 20% stake in autonomous trucking
company Plus. Instead of developing from the ground up, Plus will
retrofit existing vehicles with its autonomous system, PlusDrive.

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Is Shaping The Future Of Transportation And Logistics
While driverless trucks would decrease the cost structure
for Amazon’s logistics business, the need for drivers will not
disappear any time soon. The Plus system still requires a human
to monitor from inside the vehicle.

Amazon has also been working on autonomous delivery system

applications in-house for quite some time. It unveilved its small
delivery robot, Amazon Scout, in 2019. Since then, the company
has begun trials in Washington, California, Georgia, and Tennessee,
and has opened a new Scout development center in Finland.

In 2013, Amazon famously announced plans for a drone delivery

service. Now called Prime Air, the service promises to deliver
packages of 5 pounds or less to customers within 30 minutes.
Though it has faced a number of regulatory challenges it could
eventually provide massive cost savings, lower emissions, and
faster delivery times for the e-commerce giant.

Amazon is also looking to automate moving goods within the

warehouse, which can be dangerous and time consuming for
human handlers. In 2019, the company acquired autonomous
warehouse cart startup Canvas Technology. With this acquisition,
Amazon will likely continue to increase warehouse efficiency at its
fulfillment centers.

GROCERY & FOOD DELIVERY

Since the introduction of its proprietary grocery delivery service
Amazon Fresh in 2007, Amazon has expanded its presence greatly
in grocery and food delivery --- most notably by acquiring Whole
Foods in 2017 for $13.7B.

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Is Shaping The Future Of Transportation And Logistics
Shortly after, Amazon inked a deal with grocery distribution
company SpartanNash, purchasing warrants to own up to 15%
of the company. The deal is contingent, however, on Amazon
purchasing $8B worth of food over 7 years for Amazon Fresh
grocery stores. SpartanNash has been distributing for Amazon
since 2016, but the new deal will likely more than double its
volume and make it Amazon Fresh’s primary distributor.

Amazon has been expanding its footprint in grocery and food

delivery internationally as well. The company partnered with UK-
based grocery store chain Morrisons to offer same-day grocery
delivery service in 2016. The companies expanded the partnership
to include more locations across the UK in 2019.

Amazon has also invested in Deliveroo, an on-demand food delivery

service with a presence in Europe, Asia, and Australia. Amazon
participated in the company’s $575M Series G round in 2019.

ZERO-EMISSION LOGISTICS
In 2019, Amazon co-founded The Climate Pledge, a commitment to
be a net-zero carbon business by 2040. Since then, the company
has started The Climate Pledge Fund with $2B aimed at investing
in technology companies that help reduce carbon emissions.

One of the fund’s focus areas has been investing in vehicle fleet
electrification. This comes as no surprise considering that, according
to Amazon’s annual sustainability report, its activities emitted the
equivalent of 60.64M metric tons of carbon dioxide in 2020.

Amazon’s largest investment in this space has been its 20%

stake in the newly public electric vehicle maker Rivian. The two
companies have worked together to co-develop a purpose-built
electric delivery vehicle integrated with Alexa, advanced safety
features, and more. Rivian is set to deliver 100,000 of the vehicles
to Amazon by 2030.

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Is Shaping The Future Of Transportation And Logistics
Amazon also plans to procure 2,500 urban class 6 and 8 trucks,
and has purchased warrants in commercial EV developer Lion
Electric to that end. The trucks will improve Amazon’s middle-mile
capacity and reduce lifetime vehicle ownership costs. Amazon has
also partnered India-based EV manufacturer Mahindra Electric
Mobility to provide 3-wheeled last-mile delivery vehicles for
Amazon’s delivery operations in the country.

Another important aspect of zero-emissions logistics is charging

and battery technologies for electric vehicles. Amazon participated
in a seed round to startup Resilient Power, which is working on
converting power from the grid into effective charging stations for
EVs. It also partnered with EO Charging to charge its fleet of new
Mercedes electric delivery vehicles in Europe.

Amazon has also invested heavily in battery tech, backing

Redwood Materials in September 2020 and again in July 2021.
Redwood Materials is creating a circular supply chain by recycling
lithium-ion batteries for reuse. Companies like Redwood will help
reduce the cost of batteries significantly by eliminating the need
for mining, refining, and transportation new raw materials.

To reduce its emissions in the air, Amazon has invested in companies

working on electric aviation. The company has participated in 3
separate rounds to ZeroAvia, a startup building hydrogen-electric
powertrains that can be retrofitted into existing aircrafts.

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Connected vehicle tech

In recent years, Amazon has leveraged Amazon Web Services

to partner with several different companies to create connected
vehicle solutions.

In 2020, AWS and Blackberry QNX announced a partnership

that developed Blackberry IVY, an intelligent vehicle data platform.
The platform reads vehicle sensor data from an array of
sensors and allows automakers to create personalized vehicle
experiences and deploy machine learning modules from an AWS
Management Console.

Amazon has also partnered directly with automakers including

BMW, Ford, and Toyota to leverage AWS to build connected vehicle
services. These automakers are relying on AWS’ reliable cloud
infrastructure and products like Amazon SageMaker, which helps
developers deploy machine learning systems to put analytics at
the center of their mobility services, vehicle design, and much
more. In other words, massive amounts of data that vehicles
provide can now be used effectively by automakers to build better
products and services in the future.

By offering a connected mobility solution, Amazon is able to

increase its AWS business, use data to create tailored products for
fleet management, sell telemetry data to insurance providers, offer
over-the-air updates to vehicle operating systems, and unlock
other new recurring revenue streams.

Amazon is also partnering for driver safety in its fleets. Earlier

this year, the company began installing NetraDyne’s AI vision-
based dashcams in the cockpit of its last-mile delivery vehicles.
The dashcams provide data and feedback to drivers to increase
safety and performance on the road. Driver data like this can
help Amazon reduce incidents, lower insurance costs, and better
manage their drivers.

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In-vehicle infotainment

Amazon is also partnering with automakers and navigation

companies to provide in-vehicle infotainment systems by
leveraging Alexa, Echo hardware, and FireTV. In 2021, it announced
Alexa Custom Assistant, which allows companies to leverage
Alexa technology to build tailored intelligent assistants to match
their specific brand.

Automakers including Fiat Chrysler Automobiles, General Motors,

Hyundai, and EV startup Lucid have partnered with Amazon to
integrate Alexa in their vehicles. This allows drivers to control
media, climate, navigation, calling, and more. Amazon has also
teamed up with navigation companies Garmin and TeleNav to
provide voice first navigation and infotainment systems.

Additionally, Amazon has worked with Voxx Automotive to

integrate FireTV into the rear-seat entertainment system. Voxx
announced in early 2020 that it had entered into a Tier-1 supply
agreement with one of the largest automakers, and FireTV will be
integrated into that automaker’s vehicle program.

In-vehicle infotainment has been a particular area of focus from big

tech companies in the past few years, with tech giants Apple and
Google each releasing their own operating systems for compatibility
with their devices in the vehicle. Amazon’s approach allows the
company to leverage its existing tech to generate new revenue
streams and further grow its presence in the automotive industry.

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Is Shaping The Future Of Transportation And Logistics
Mobility-as-a-service

In June 2020, Amazon acquired robotaxi startup, Zoox. Six months

later, Zoox unveiled its driverless robotaxi, which the two companies
plan to use for an autonomous ride-hailing service. The companies
have also not ruled out package delivery applications for the vehicle.
Taking the driver out of the equation for last-mile delivery could
greatly reduce costs for Amazon’s logistics operation.

Although Zoox will continue to operate as a standalone business,

having Amazon as a parent company automatically introduces
a large customer base with Prime members. On the other side,
ownership of Zoox will provide Amazon a foot-in-the door to
competing in this industry with other automotive and tech giants
like Google’s Waymo or General Motors’ Cruise.

Amazon also invested in India-based bus aggregating platform

Shuttl in 2018 and again in January 2020. This deepens Amazon’s
ties to the transportation industry, but it could also enable riders
to handle and deliver packages as a means of extra income and
reduce in greenhouse gases by carpooling. The service could also
expand into the US eventually. In early 2021, Shuttl was acquired
by Chalo, another MaaS platform aimed at buses.

The Indian market has been an increasing area of focus for

Amazon. For example, Amazon Pay partnered with Uber India to
install safety screens in 40,000 vehicles and allow riders to make
contactless payments.

Analyzing Amazon’s Growth Strategy: How The Tech Giant 12

Is Shaping The Future Of Transportation And Logistics
Additional reading

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Analyzing Amazon’s Growth Strategy: How The Tech Giant 13

Is Shaping The Future Of Transportation And Logistics