Amazon.com Inc. is testing a new delivery service that could potentially rival those offered by longtime partners United Parcel Service Inc. and FedEx Corp., Bloomberg reports, citing unnamed sources.
The service is aimed at making more products available for free two-day delivery and easing overcrowding in its warehouses.
The project, called Seller Flex, is being tried in India and gradually marketed in the United States prior to a national expansion, the report said.
Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, the sources said. These functions are now being handled by UPS and FedEx.
Handling more deliveries itself would give Amazon greater flexibility and control over the last mile to shoppers’ doorsteps, let it save money through volume discounts, and help avoid congestion in its own warehouses by keeping merchandise in the outside sellers’ own facilities, Bloomberg said.
“Amazon’s final-mile efforts reflect a logical extension of its model as it builds network density,” Benjamin Hartford, a Robert W. Baird analyst, said in a note.
FedEx and UPS shares were likely to come under pressure, however, since investors could be concerned about another “data point of Amazon’s encroachment on the broader logistics space,” he said.
Shares of UPS and FedEx fell on Thursday after Bloomberg reported the new Amazon service.
“Amazon is a valued UPS customer,” UPS spokesman Steve Gaut was quoted as saying. “We support all our customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future.”
FedEx said it wouldn’t comment on Amazon’s plans but pointed out the “scale, infrastructure and complexity” involved in running a global transportation network.
The company said it’s innovating in ways related to new services for e-commerce residential deliveries, but noted that is “only one piece of the capabilities that we provide”.
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