WSJ/ZDNet
Amazon.com is preparing to launch a delivery service for businesses, positioning it to directly compete with United Parcel Service and FedEx.
Dubbed "Shipping with Amazon," or SWA, the new service will entail the tech giant picking up packages from businesses and shipping them to consumers, according to people familiar with the matter.
Amazon expects to roll out the new delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website, according to the people. Amazon then aims to expand the service to more cities as soon as this year, some of the people say.
Amazon's move to develop its own shipping service isn't surprising. Shipping could hamper Amazon's plans in the future. A shipping service could also be a profit engine.
UPS and FedEx have the ability to raise prices and upend Amazon's cost structure. Shipping is a massive expense. Stifel analyst David Ross noted:
UPS is growing nicely off a large base (more thanks to Amazon than in spite of Amazon) in all segments and now is increasing spending significantly on capacity growth.
Meanwhile, Amazon mentioned how shipping is critical to its business in its annual report. Reliance on UPS and FedEx is also a liability. Amazon said in its 10-K:
- Amazon is piloting SWA with third party sellers, but it can open it up to other businesses. That move can keep costs down.
- The company already has launched its own freight service. (See also: Amazon's Prime Day marks debut of Prime Air cargo planes, a FedEx, UPS threat)
- Controlling the last miles of delivery is also critical to expand Whole Foods delivery operations.
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