This article originally appeared on Real Money on Sept. 28, 2016.
For example, the company's initial success as a direct online retailer provided the groundwork for building a third-party seller marketplace, and the warehouses built to support its direct e-commerce sales enable both the creation of fulfillment services for third parties and Amazon's Prime two-day shipping service.
Likewise, Amazon Web Services was made possible by the data center infrastructure Amazon built for direct and third-party e-commerce sales. And Prime's growth helped justify the costs of building popular video and music-streaming services for Prime subs.
All of this provides important context for Amazon's efforts -- pretty much an open secret at this point -- to lower its reliance on third-party delivery firms such as UPS (UPS) - Get Report, FedEx (FDX) - Get Report and the U.S. Postal Service.
The Wall Street Journal is the most recent publication to take a look at these efforts, highlighting the company's last-mile delivery trials in big cities such as Los Angeles, Chicago and Miami and stating that Amazon now "delivers its own packages from roughly 70 facilities in 21 states."
Amazon's warehouse-building binge has helped make this possible: Consulting firm MWPVL estimates Amazon now has more than 180 U.S. warehouses, or more than twice as many as it had in late 2013. Piper Jaffray estimates 44% of Americans are now within 20 miles of an Amazon facility, up from just 5% in 2010.
But there's now a lot more to Amazon's logistics infrastructure than just warehouses. To help move goods between its facilities, the company has leased fleets of Boeing 767 jets, and purchased thousands of Amazon-branded truck trailers that are driven by third-party firms. And as the WSJ observes, last-mile deliveries are increasingly made either by Amazon trucks or local delivery firms picking up goods from an Amazon warehouse.
There's also Amazon's Uber-like Flex service, which pays drivers by the hour to fulfill orders (using their own vehicles) for the Prime Now rapid-delivery service. Long-term, Amazon is also hoping to fulfill orders via its Prime Air drones. And with the company's Chinese unit having taken out a U.S. ocean freight license, a shipping fleet looks plausible.
None of this possible without huge shipping volumes. And this is where Amazon's still-tremendous growth, fueled by Prime adoption and third-party marketplace sales, comes into play.
Forty-nine percent of Amazon's second-quarter paid unit sales came via third parties, up from 45% a year earlier and 41% in Q2 2014. And research firm CIRP estimates Amazon had 63 million U.S. Prime subs as of June, up from 44 million a year earlier.
The firm also estimates the average U.S. Prime member spent $1,200 on Amazon last year, and the average non-member just $500. And with annual Prime subscriptions typically costing $99 per year, Amazon's Prime-related subscription revenue might now be north of $6 billion in the U.S. alone.
Spending by Prime members, much of it involving third-party sellers supporting Prime with the help of Amazon's fulfillment services (FBA), helped Amazon's North American segment revenue rise 28% annually in Q2 to $17.7 billion, and its International segment revenue 30% to $9.8 billion. That, along with a 58% increase in Amazon Web Services revenue, made a 35% increase in fulfillment spending (to $3.9 billion) palatable.
Amazon still insists it's only looking to supplement, rather than replace, the likes of UPS and FedEx with its delivery efforts. But the incentives for doing more and more "supplementing" -- lower shipping and FBA costs, faster delivery times during peak periods, greater Prime customer satisfaction and potentially an increase in the number of third-party goods relying on FBA and supporting Prime -- are pretty strong.
And perhaps for the first time, Amazon's sales and warehouse infrastructure are big enough to make such investments on a large scale.