Amazon, it seems, wants to enter every possible business segment it can to add more and more revenue streams to its growing empire. Now there are reports that the online retailer is planning to come up with a delivery service for businesses to take on the biggies like FedEx and UPS.
Amazon’s new service will be called Shipping with Amazon, The Wall Street Journal reported on Friday. Shipping With Amazon will be used to deliver products sold by third-party vendors on the shopping site. At some point, the delivery service will be expanded to businesses that are not selling on Amazon’s site.
Amazon is reportedly planning to compete with UPS and FedEx on the price front. The pricing structure, however, hasn’t been revealed. Amazon officials did not actually confirm the report, but they didn’t deny it either.
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
“We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices,” the online retailer told Fortune in a statement.
It must be noted that UPS handles a major portion of Amazon Prime deliveries, according to Fortune. It will be interesting to see how the partnership between the two goes after the release of Shipping With Amazon.
A spokesperson for UPS told CNBC in a statement: “UPS continues to support Amazon and many other customers and we don’t make comments about their business strategies or decisions regarding their utilization of UPS services.”
Many believe that Amazon’s entry into the space could mean trouble for traditional players like UPS and FedEx. However, CFRA Research analyst Jim Corridore believes Amazon’s entry will not be as disruptive as others expect.
“We think the current economic expansion and surging e-commerce volumes are able to support a new competitor,” the analyst said, according to The Los Angeles Times.
The Shipping with Amazon service is expected to launch in the coming weeks in Los Angeles and expand to more cities later in the year, says the WSJ, citing unnamed sources. According to the WSJ, Amazon has been testing the service from warehouses next to Los Angeles International Airport.
For Amazon, starting a delivery service is relatively easy as it already has much of the needed infrastructure in place. The online retailer has cargo planes, ocean freights, lockers, warehouses and also smart home devices that allow couriers into homes to make a delivery.
In addition, the shipping industry is a lucrative segment. UPS reported revenues of $18.83 billion in its most recent quarter. The numbers are surely big enough to attract even the biggest online retailer.
A delivery service would also help the company cut costs and have better control of logistics. In 2017, Amazon’s spending on shipping products to customers amounted to $20 billion. So by taking over delivery, the company would have better control over shipping costs.
Following the WSJ’s report about Shipping with Amazon, FedEx and UPS shares slipped on Friday.