February 9, 2018

Amazon is taking on UPS and FedEx by launching its own delivery service

By Allie Nawrat

Amazon is unveiling a delivery service for businesses that will compete with UPS and FedEx, according to a report by the Wall Street Journal.

The new Amazon delivery service is reportedly named Shipping with Amazon (SWA).

Under the scheme, Amazon will pick up products from businesses and then ship them to the customer.

Amazon’s newest service is alleged to be offered to its third-party merchants in Los Angeles in the coming weeks. The plan is then to roll out SWA to other businesses across over US cities.

The launch follows pilot programmes that began in 2016. The programmes took place in a few cities across the world, including one in London.

What this means:

United Parcel Service (UPS) and FedEx have dominated the consumer shipping industry since the early 2000s. Amazon’s announcement could erode their control..

What will determine Amazon’s ability to undercut the two shipping giants will be if it can beat them on price. Although Amazon has to catch up with UPS and FedEx in terms of networks and shipping capacity, it has already begun to start developing its logistics capacity.

This was following the issues it faced in the 2013 Christmas period when its delivery partners, UPS and FedEx, faced major shipping issues. Amazon was forced to refund shipping charges and offer $20 gift cards to customers as a result of the fiasco.

Amazon has its own fleet of cargo jets, warehouses, last-mile contract couriers and an air cargo hub as a result. It can also act as an ocean shipping agent.

It also has the advantage of already delivering its own brand products across the US which means it can easily deliver more packages without increasing overheads by filling up its existing trucks with other businesses’ packages.

However, for the time being, it remains likely Amazon will continue to rely on UPS to fill in gaps in its coverage until it can further develop its capacity.

Until then, UPS and FedEx should watch out. The companies shares are down today following the news, 3.55 percent and 4.04 percent respectively.

Last month Amazon, Berkshire Hathaway, and JP Morgan Chase announced their new healthcare alliance, it put a major dent in 10 of the US’s biggest healthcare companies’ stocks.

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