At least 12 employees were assigned to the group more than a year ago to examine how driverless vehicles could help Amazon deliver packages more quickly, the Journal reports, citing sources familiar with the matter. This means that the e-commerce giant is unlikely to build its own fleet of self-driving cars; rather, the team looks at how unmanned trucks, forklifts and drones can be used to streamline what is considered to be one of the most crucial steps in Amazon's delivery supply chain: last mile delivery.
Last mile delivery is the process of delivering packages from a transportation hub to a final destination that's usually a residence. Amazon has launched a number of services to make last mile delivery operate more efficiently, such as Prime two-day shipping, Prime Now (which provides one- and two-hour delivery) and, soon, Prime delivery via unmanned drones. The last mile phase is one of the most expensive steps of delivery and self-driving vehicles could pare some of costs, said Jan Dawson, chief analyst at Jackdaw Research. During the last mile delivery phase, the vehicle has to make single-package trips to every destination, while in earlier stages, multiple packages can be delivered together by sea, air or land, Dawson noted.
By automating last mile logistics, Amazon would also be stepping up its competition with major delivery giants such as UPS (UPS) and FedEx (FDX) -- a market that experts have long predicted Amazon could go after in the coming years. A large chunk of UPS, USPS and FedEx's business comes from delivering Amazon packages, so the possibility serves as a significant threat, said Vivek Wadhwa, a fellow at Carnegie Mellon University in Silicon Valley and author of "The Driver in the Driverless Car: How Our Technology Choices Will Create the Future."
"[Last mile delivery] is the hardest part and that's why we need mailmen and delivery services," Wadhwa noted. "But if we had self-driving cars doing that...it's going to be severe damage to FedEx, UPS and so on."
Amazon's automated delivery services, like drones and trucks, could start to make an impact on traditional delivery companies' bottom lines as soon as 2020, Wadhwa predicts.
The Seattle-based company has filed several recent patents that point to Amazon's goal of becoming less reliant on UPS and FedEx, as well as its desire to build a logistics powerhouse, said Nicholas Pappageorge, tech industry analyst at CB Insights. As of last year, Amazon had filed 78 patents so far related to logistics, unmanned aerial vehicles, freight and autonomous vehicles, according to CB Insights.
One of those patents details the creation of an airborne fulfillment center, or flying warehouse, that would control delivery drones, while another surrounds building a highway network to stop self-driving cars from crashing. The patents show that Amazon is increasingly figuring unmanned drones into the last-mile logistics process and, at some point, autonomous cars could play an integral role, Pappageorge said.
"As autonomous trucking increasingly becomes a part of middle-mile and last-mile logistics, integrating the technology would be strategically aligned with these efforts," he added.
Rivals including Apple (AAPL) , Alphabet (GOOGL) , Microsoft (MSFT) , Uber and Tesla (TSLA) have begun their foray into self-driving cars, but unlike its competitors, Amazon wouldn't be focusing on the autonomous software itself, Wadhwa said. Instead, Amazon is looking to carve out a portion of the autonomous vehicle market for themselves, mirroring the playbook it has used for previous pursuits: Identifying customers' needs before they even know they needed them, he noted.
"I don't see Amazon having a self-driving car anywhere in the future," Wadhwa said. "I see them having self-driving delivery vehicles and providing content for self-driving vehicles."