Amazon is reportedly experimenting with a new delivery service, aiming to take on private shipping companies such as FedEx and UPS.
Bloomberg reports that e-commerce giant Amazon has plans to start their own private package delivery service to rival the likes of FedEx and UPS. Amazon’s new service would see many more of their online items eligible for free two-day delivery, a service that was previously handled by Amazon’s partners UPS and FedEx. The service is not entirely new, having been operational in India for the past two years, but Amazon has begun marketing the service to U.S. sellers as the company prepares to launch the shipping service domestically.
One anonymous source told Bloomberg that the product was planned to be called “Seller Flex” and that the service had already been rolled out West Coast states but a larger expansion is planned across the entire U.S. in 2018. Amazon declined to comment on the validity of these claims according to Bloomberg. Robert W. Baird analyst Benjamin Hartford, said in a note to Bloomberg that, “Amazon’s final-mile efforts reflect a logical extension of its model as it builds network density,” and that FedEx and UPS shares were likely to be put under pressure as investors could be worried about “data point of Amazon’s encroachment on the broader logistics space.”
Steve Gaut, a UPS Spokesperson said in a statement, “Amazon is a valued UPS customer. We support all our customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future.” FedEx did not reply to Bloomberg’s request for comment. Kevin Sterling, a Seaport Global Holdings analyst, agreed with Hartford’s analysis saying, “Shares are going to be under pressure” for UPS and FedEx “because it’s Amazon and no one wants to go head to head with them. But if you look at the world of e-commerce and double-digit growth year after year, FedEx and UPS are still going to get their share of growth. If Amazon does take a few customers, the whole e-commerce pie is growing so fast that FedEx and UPS won’t miss a beat.”
Amazon has been experimenting with methods to shorten delivery times in recent years; the company built a number of “sortation centers” around the country where packages are sorted by their zip code and delivered to post offices around the country with the US postal service carrying out the final delivery. Amazon also introduced Amazon Flex which used independent contractors driving their own vehicles to deliver packages to Amazon shoppers. Amazon’s Prime Now service can also deliver items such as phone chargers and bottles of water to Amazon shoppers within an hour of ordering in many U.S. cities.
Forrester Research Inc. estimates that online shopping spending during the holiday season in the U.S. will reach approximately $129 billion this year, a 12 percent increase from last years spending, given Amazon added incentive to streamline their shipping service.