Beginning in Los Angeles, e-commerce giant Amazon is set to launch its own delivery service for businesses which one day could rival UPS and FedEx, said reports on Friday.
The new service, Shipping With Amazon, delivers goods sold by vendors that are third-party on the e-commerce platform of the tech giant. It is expected that the service will roll out during the coming weeks prior to expanding into other large cities during the course of 2018.
Amazon did not address the report in a direct manner, but through a prepared statement said it is always innovating as well as experimenting on behalf of its customers and businesses that sell and expand on Amazon to make lower-cost, faster delivery choices.
The service originates from a pilot program that was launched out of a warehouse near the Los Angeles International Airport, says reports. On the news of the new venture by Amazon, shares of UPS and FedEx slipped on Friday.
Amazon has for quite some time shown a great deal of interest in the building of its own logistics network that one day could become a strong competitor to the established worldwide couriers.
By establishing a courier service the company could one day become even more profitable due to economies of scale. Amazon has seen its shipping costs steadily mount in tandem with the growing sales of the company.
An analyst in the shipping industry said that the entry by Amazon into deliveries will send shivers up and down the spines of the established delivery companies.
The danger to the traditional delivery businesses is twofold. On one side they will likely lose business from Amazon, which at first will be quite slow, only to accelerate as the company rolls out more delivery services of its own.
In addition, if Amazon begins offering delivery to businesses it would likely do it at rates that are reduced.
The current expansion in the economy and the surging volumes in e-commerce can support another competitor said one analyst. However, Amazon will also find it both costly and difficult competing with the infrastructures of UPS and FedEx.
In addition to the marketplace it has online, Amazon runs a cloud computing segment, a Hollywood studio as well as a grocery business after purchasing Whole Foods in 2017.
News Amazon might kick it delivery service off comes only a day after the company announced its Prime members are now getting two-hour delivery of food from Whole Foods in four selected areas to start.