Amazon is said to test its own delivery service

by Ben Pena October 6, 2017, 0:10
Amazon is said to test its own delivery service

Amazon's $145 billion in USA gross merchandise volume, an estimate from Bloomberg Intelligence that includes third-party sales, is still a relatively small share of overall retail volume.

Amazon is reportedly testing its own delivery service, and that news isn't sitting too well with investors in UPS and FedEx. The project, which is dubbed "Seller Flex", was deployed in West Coast states on a trial basis earlier this year, and is eyeing a broader rollout in 2018.

There's a few reasons that Amazon may want its own delivery service. Sellers who are approved must purchase shipping for all Prime items through Amazon's Buy Shipping Services. If Amazon keeps expanding its e-commerce empire, saving on these deliveries could help out its bottom line, but in turn shave off some business from UPS and FedEx. Bloomberg cited analyst estimates that Amazon accounts for 5 to 10 percent of UPS revenue, and FedEx has said the retail giant makes up less than 3 percent of sales. Shares of both delivery services declined more than 2% in premarket trading before rallying slightly below previous-day levels. By controlling the "last mile" of delivery, the company could save money through volume discounts and better control the inventory of its own warehouses that can solve supply chain problems especially around the holidays.

"We don't comment on speculative news stories but there continues to be reporting related to our networks and the transportation industry that demonstrates a clear misunderstanding of the scale, infrastructure and complexity involved in running a global transportation network", according to FedEx SVP of Integrated Marketing and Communications Patrick Fitzgerald.

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It's important to remember that Amazon is not the only e-commerce game in town.

Amazon has always been experimenting with making deliveries faster.

Shares at Amazon have outperformed the delivery companies thus far in 2017, as the giant of e-commerce is up by 29% through the first nine months, while UPS is up 4% and FedEx up 19%. So what'll happen once they start shipping packages themselves?

Third-party merchants have paid fees to store products at Amazon's warehouses.


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