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E-commerce giant is expanding into remote areas after years of fine-tuning its delivery systems in more dense cities

Amazon.com AMZN 0.38%increase; green up pointing triangle is reaching into the remote corners of America to deliver its packages quicker to customers in rural areas, a push that represents its last frontier of ultrafast delivery in the U.S.

The retail giant is expanding its one- to two-day delivery capabilities throughout the country as it seeks to boost sales in less-populated regions. Amazon is ready to tackle rural regions after years of fine-tuning its logistics systems in more dense areas of the country.

Details of this expansion haven’t been previously reported.

The strategy means customers in small towns will receive Amazon packages faster, and fewer of those deliveries could be handled by the U.S. Postal Service, which has a mandate to deliver to all addresses in the country and is typically relied on for rural parcel deliveries.

Amazon has been building a logistics empire that, by some measures, has surpassed UPS and FedEx. To reach deeper into rural America, the company is using hyper-efficient warehouses, contracted drivers and mom-and-pop shops.

Amazon’s goal is to increase its shipping volume and have more control over its deliveries. The company is seeing demand in more remote pockets of the country and betting that offering faster delivery to rural customers increases the rate at which they purchase items. By increasing its volume, it can offset the higher delivery costs with the fees it charges its sellers.

Amazon isn’t trying to deliver itself to 100% of its customers in the U.S., but as of now is targeting around 90%, people familiar with its plans said. Amazon said it now delivers more than two-thirds of its own packages in America.

Maya Vautier, an Amazon spokeswoman, said expanding the rural delivery network “will help cut delivery times for customers in smaller towns and more isolated parts of the country.”

The rural push comes as Amazon has pinned down what customers want and where demand is. Many people moved to live and work remotely during the Covid-19 pandemic, and the company is pushing to expand categories such as medicine delivery.

“As Amazon has gotten better at delivery, it has become economically practical to do it in more places,” said Josh Lowitz, co-founder of Consumer Intelligence Research Partners, which studies Amazon Prime members. “They have learned that they can do it.”

Competing with the post office

Amazon is opening optimized delivery centers that are smaller than its traditional warehouses and closer to rural areas and increasing the level of automation across its delivery network. It is using contracted drivers and enlisting small businesses to at times handle deliveries and store packages for customers to pick up. Amazon’s remote expansion includes small cities and towns in Arizona, Minnesota, Louisiana and Texas.

Amazon’s outreach is also a way to lessen the company’s exposure to the U.S. Postal Service. The USPS has been raising rates and reducing pickups in some areas. To compel shippers to use more of the Postal Service’s network, the USPS has said it wants to modify contracts to end discounts to shippers dropping parcels off at delivery units just for the difficult final mile of deliveries.

The USPS isn’t worried about the competition, said a spokesman. The Postal Service’s infrastructure enables daily package delivery to every address at an affordable rate that competitors would be hard-pressed to match, he said.

If Amazon believes it can deliver its packages more efficiently than the USPS, it will do so, company insiders said. Amazon said that the USPS remains “valued partners.”

While retail margins can generally be low, especially when delivering to remote locations, Amazon has built a logistics operation that in 2023 generated almost a quarter of Amazon’s total revenue through fees it charges sellers on its site to store, pack and deliver items. That massive business helps offset costs and depends on consumers to buy evermore items.

Getting toilet paper to Ely, Minn.

Amazon’s deeper dive into remote pockets is a strategy to maintain a competitive edge against its fiercest rivals. Walmart, which has thousands of stores in rural areas, has been expanding a service called GoLocal that delivers packages for other retailers “anywhere in the U.S.” through third-party contractors. E-commerce firm Temu, which has risen in popularity in the U.S. because of its bargain prices, relies on carriers that include the USPS.

Duluth, Minn., is an area where Amazon is expanding. The company plans to open its first delivery site in the city in an industrial park area that was once the home of a steel plant.

The greatest beneficiaries of the new Amazon site will be the areas near Duluth, said Daniel Fanning, vice president of strategy and policy of the Duluth Area Chamber of Commerce. He pointed to places in Minnesota like Ely, which has a population of about 3,200 and Grand Marais, with a population of roughly 1,300, according to the latest Census figures.

Customers in those and similar remote areas sometimes wait three to five days for some Amazon packages, Fanning said. That time could soon be cut in half, he said.

“Some people that order medicine or other important things could benefit,” he said.

A search of Amazon’s products makes the company’s ambitions clear. A pack of WaterWipes baby wipes, one of Amazon’s most in-demand products, can take a day or less to get to San Francisco area zip codes. The same item showed several days to get to Ely. A pack of Charmin toilet paper showed similar results. Amazon wants to bridge that gap.

A competitor and customer

The company has long desired to dominate its own e-commerce parcel delivery in America, and it has made immense strides. In recent years, it has sought to deliver packages to large population centers in a day or less. The company aims to reach certain remote areas in a day, insiders said.

Amazon is delivering an increasing share of its own orders. As of last year, market research firm ShipMatrix said the USPS handled about 9% of Amazon’s packages, while UPS handled about 8%, both significantly down from 2019.

Carriers have a tough relationship with Amazon, which is simultaneously a customer and a competitor. Amazon last year revived a service that handles packages sold on Amazon’s website, as well as items from other websites and selling channels. The service is seen as a competitor to UPS and FedEx.

A partnership between Amazon and FedEx soured in 2019 when FedEx said it would end delivery contracts to move Amazon’s boxes.

As Amazon has encroached further into rural territory, the USPS has extended delivery times for mail in its current restructuring program. In places where there is less mail, the agency has tested a program in which trucks collect mail only in the morning rather than twice a day, which has worried some rural residents. The Postal Service has said this is temporary and that it expects service to improve as changes mature.

The company backed its production outlook and raised its steelmaking coal guidance

Glencore GLEN -3.01%decrease; red down pointing triangle could make a decision on the future of its coal business as early as next week as it mulls a spinoff of the unit.

Earlier this month, the Anglo-Swiss commodity miner acquired a majority stake in Teck Resources’ TECK.B 0.34%increase; green up pointing triangle steelmaking coal assets in a $9 billion deal, and has since been consulting shareholders over a potential demerger of the combined coal and carbon-steel materials business.

“We expect to be able to announce the outcome of such engagement and the decision of the board regarding the potential demerger alongside our interim results next week,” Glencore Chief Executive Gary Nagle said.

However, analysts at Jefferies said in a note that they expect the London-listed company to keep hold of the business.

“We believe a coal demerger is highly unlikely, and we believe the acquisition… will prove to be a significant positive for Glencore as this is the world’s highest quality metallurgical coal business by a fairly wide margin,” analysts Christopher LaFemina and Patricia Hove said.

As a result of the deal, Glencore on Tuesday upgraded its steelmaking coal production guidance for the year to between 19 million and 21 million tons, from between 7 million to 9 million tons previously.

The company maintained full-year production guidance elsewhere, expecting an uptick in volumes during the second half.

“2024 is expected to be a year of two halves, whereby the tracking of our year-to-date production versus guidance is expected to be caught up during the second half of the year,” Nagle said.

The company produced 462,600 metric tons of copper in the first half, down 5.2% from the same period a year ago.

Zinc production fell 4% year, while steelmaking and energy coal production declined 8% and 7% respectively. Only lead posted a production increase in the period, while gold production remained flat on year.

The Takeaway

Humane, a maker of a wearable AI device, has appointed ex-Cisco CEO Chambers to its board after holding discussions about a sale.

Humane, the maker of a wearable device that aimed to replace smartphones, has told investors that former Cisco CEO John Chambers is joining its board of directors, according to two people with knowledge of the decision. The move came after the six-year-old San Francisco startup recently considered a sale after reviewers panned the device, and it has been in talks to raise debt from its current investors that would later turn into equity.

Chambers has considerable experience with acquisitions from his time at the data center networking giant. Humane’s device, which went on sale earlier this year, is outfitted with a forward-facing camera, speaker and laser that can project text onto users’ palms, uses artificial intelligence to send messages, take photos and answer questions about the wearer’s surroundings.

Aside from Humane’s novel device and accompanying patents, its team of ex-designers and engineers from Apple, Tesla and Nvidia could be appealing to potential acquirers that want to work on AI-powered devices.

The company has closed a portion of an additional round of financing from existing investors and is still in fundraising talks, according to one of the people with knowledge on the financing.

OpenAI CEO Sam Altman, Meta CEO Mark Zuckerberg and other leaders have been pursuing wearable AI devices, including glasses and earbuds with forward-facing cameras and speakers. The leaders aim to use the same technology behind chatbots like ChatGPT to act as an on-the-go assistant for wearers of the devices.

Chambers struck 180 deals during his 20-year tenure as Cisco’s CEO and now runs a venture firm called JC2 Ventures, which has backed Rubrik and OpenGov. The New York Times previously reported that Humane talked to potential acquirers such as HP about a deal.

Chambers declined to comment. HP didn’t immediately respond to request for comments.

A sale would mark a disappointing conclusion for Humane, which was founded by two ex-Apple employees with ambitions to harness AI for “ambient computing” that allows users to engage with technology without interacting with smartphone or computer screens. It raised more than $240 million from investors including Microsoft, Tiger Global Management, OpenAI’s Sam Altman and Marc Benioff’s Time Ventures, fetching a valuation of $850 million at its Series C in March 2023.

Its founders’ pedigree, combined with enthusiasm for the device’s prospects, laid the groundwork for a glitzy launch. Humane co-founder Imran Chaudri demonstrated the pin on a TED Talks stage in April 2023 and the startup got some models to wear it at Paris Fashion Week in September.

But early reviewers of the device, which starts at $699 plus a $24 monthly subscription for a phone number, cellular data and cloud storage, were harsh. YouTuber Marques Brownlee called it the “worst product” he’s ever reviewed. And customers complained they had a hard time canceling orders.

The rough start called into question its future, particularly as the founders of AI startups such as Inflection and Adept left their companies to work for tech giants Microsoft and Amazon, respectively.

Beyond the steep cost of computing that dog all AI startups, the cluster of companies making AI devices, such as Rabbit, also face particular difficulties: Large language models like those developed by OpenAI and Anthropic are usually too large to run on-device, meaning that these AI devices still require an internet connection and can be extremely slow.

Earlier this year, Humane laid off 10 employees and its CTO Patrick Gates stepped down from the C-suite role, changes that co-founder and CEO Bethany Bongiorno said would prepare Humane for its “next phase of growth.”

I just spent a relaxing week at the beach that started in turmoil: Mine was one of more than 3,500 Delta flights canceled as a result of a CrowdStrike-sparked outage that also shut down hospital, bank and courthouse systems.

While Delta’s still on the hot seat with transportation regulators, Wall Street seems to have largely forgiven CrowdStrike—though the stock’s after-hours drop Monday show how skittish investors can be.

Two reports Monday predicted that CrowdStrike would be able to absorb the financial damage and bad rap from a July 19 software update that backfired. The stock rose 1% in regular trading, a contrast with more than 1% losses in cybersecurity rivals SentinelOne and Palo Alto Networks.

J.P. Morgan’s Brian Essex shaved 13% from his past yearly estimates of net annual recurring revenue generated by CrowdStrike’s software sales and reduced his estimates on cash flow. But Essex said he viewed the incident as a “black swan event” and thought the company’s quick responses will support “the business and the brand longer term.”

Morgan Stanley’s Hamza Fodderwala was even more optimistic, estimating a 3.3% hit to CrowdStrike’s net new ARR as some customers pause on new deals.

Notably, both analysts aren’t predicting a big loss from irate customers asking for compensation, in part because many likely have insurance against these risks. J.P. Morgan guessed CrowdStrike might have to put aside $500 million for potential legal action and related costs. As a bullish sign, noted Morgan Stanley, CrowdStrike doesn’t appear to have granted concessions or credits to its customers.

CrowdStrike isn’t out of the woods yet. The stock lost 6% in after-hours trading after CNBC reported Delta hired the law firm of Boies Schiller Flexner, presumably presaging a lawsuit. Such losses, if they roll into Tuesday’s session, would add to the stock’s 25% decline since revealing the outage.

And two events—Microsoft earnings on Tuesday and an expected Congressional hearing on the outage—could introduce new details that cast CrowdStrike’s role in a worse light.

CrowdStrike investors could win if Wall Street’s rosy projections on growth are right. But they’re likely in for a bumpy ride.