Amazon plans to launch business delivery service

Avatar By Susan Konig | 3 years ago

On Friday, February 9, Amazon, Inc. announced plans to launch a delivery service for businesses which would directly compete with United Parcel Service Inc. and FedEx Corp. Shares of UPS and FedEx both fell approximately two percent on the news.

Amazon expects to roll out a new delivery service, called “Shipping with Amazon” (SWA), in Los Angeles in coming weeks, according to the Wall Street Journal.

The service, which will involve Amazon picking up packages from businesses and shipping them to consumers, could expand to more cities as soon as this year, the report said. It is being piloted with Amazon’s third-party sellers, and could eventually be opened to other businesses.  Amazon said it is planning to undercut UPS and FedEx on pricing, although the rate structure was not released.

Shares of FedEx fell to $234.59, while UPS was at $106.80 on the New York Stock Exchange.

“There is tremendous opportunity in the business-to-customer market (i.e. Walmart to household deliveries) and more growth coming to the sector and UPS, irrespective of how other companies shift strategies,” UPS spokesman Glenn Zaccara said.

Some analysts say Amazon, which would have to invest $100 billion to compete with UPS and FedEx, looks to be targeting the “last mile” deliveries to households fueled by online shopping, which has grown fast in recent years but is a lower margin business.

“Amazon hasn’t made a meaningful push into the true transportation asset ownership we believe is necessary to be a competitor” said Citi analyst Christian Wetherbee. It appears to be a difficult task to compete in this market as an asset light parcel delivery carrier.”