UPS, FedEx stocks fall as Amazon moves further into delivery space

Online retailing behemoth Amazon.com Inc.

Recent reports claim that the online retailer has been testing the delivery service out in India and more recently in the U.S. The service is going by the code name "Seller Flex".

Amazon didn't specifically deny the report but issued a statement to GeekWire in response to questions about the reported plans, saying "We are using the same carrier partners to offer this program that we've used for years, including UPS, USPS and FedEx". The service began on a trial basis this year in West Coast states with a broader rollout planned in 2018, the people said.

The service began two years ago in India, and Amazon has been slowly marketing it to US merchants in preparation for a national expansion, said the people, who asked not to be identified because the USA pilot project is confidential. As of 10am ET, shares for Amazon were up 7.3 per cent at $973.38.

FedEx shares were up 0.9% at $220.27.

FedEx CEO Fred Smith downplayed concerns about Amazon's potential entrance into delivery during a conference call with analysts last March.

Bloomberg said with the project Amazon would directly take over functions typically handled by UPS and FedEx.

"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. The service is meant not only for businesses to reach customers but also for home-to-home delivery in as little as two hours in selected cities. There are many sellers on Amazon Central who use P.O. boxes for returns, and UPS does not deliver to P.O. boxes. Rather than relying on the delivery services, Amazon will pick up products from vendors and deliver them to customers.

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

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

Amazon is constantly experimenting to shorten delivery times and reduce costs.

But the popularity of this service strains Amazon's capacity during the end-of-year holidays.

  • Anthony Vega