Amazon to Launch Delivery Service That Would Vie With FedEx, UPS -- Update
10 February 2018 - 5:06AM
Dow Jones News
By Laura Stevens
Amazon.com Inc. is preparing to launch a delivery service for
businesses, positioning it to directly compete with United Parcel
Service Inc. and FedEx Corp.
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.
While the program is being piloted with the company's
third-party sellers, it is envisioned to eventually be opened to
other businesses too, according to some of the people. Amazon is
planning to undercut UPS and FedEx on pricing, although the exact
rate structure is still unclear, these people said.
The new service, which stems from a Los Angeles pilot project
first reported by The Wall Street Journal more than a year ago,
moves Amazon into direct competition for parcel business currently
handled by delivery partners UPS and FedEx. "Shipping With Amazon"
was previously tested and rolled out in London.
It is the latest move by Amazon to create its own freight and
parcel delivery network. In the last couple of years, Amazon has
expanded into ocean freight, built a network of its own drivers who
can now deliver inside homes and leased up to 40 aircraft while
establishing an air cargo hub.
Amazon already delivers some of its own orders in at least 37
U.S. cities. With the new "Shipping with Amazon" option, Amazon
plans to send drivers to pick up shipments from warehouses and
businesses itself and deliver the packages when it is able, the
people said. For shipments outside Amazon's delivery reach, the
U.S. Postal Service and other carriers will take care of the
so-called last mile to customers' doorsteps.
"We're always innovating and experimenting on behalf of
customers and the businesses that sell and grow on Amazon to create
faster lower-cost delivery choices," a spokeswoman said in a
statement.
It remains to be seen whether Amazon can successfully deliver
packages for other businesses on a broad scale. UPS and FedEx have
built out massive networks over the course of decades to allow them
to deliver across the U.S. And it is expensive. UPS this year alone
is planning to spend up to $7 billion on upgrading its delivery
network.
A spokesman said that UPS continues to support Amazon and other
customers and doesn't comment on customers' business strategies or
decisions regarding using UPS services.
FedEx in a statement Friday pointed to a video on its website
that outlines the size, scope and expertise of its global delivery
network, including its over 40 years of experience, roughly 650
aircraft, 150,000 trucks, 400,000 employees and 4,800 operating
facilities globally to handle about 12 million shipments a day.
On FedEx's December earnings call, executives were asked about
what would happen if Amazon started competing for its shipping
business, to which they said they don't comment on hypothetical
situations. They added that Amazon was a longstanding customer, but
that no one customer represented more than 3% of its revenue or
volume.
Amazon's push into logistics reflects its growing ambitions
across a wide range of new businesses beyond online retail. The
company runs a dominant cloud-computing services division, a
Hollywood studio and a massive marketplace and logistics operation
for sellers. Last year, it acquired Whole Foods for roughly $13.5
billion, transforming it into a brick-and-mortar grocer
overnight.
Last week, Amazon said it was teaming up with JPMorgan Chase
& Co. and Berkshire Hathaway Inc. to form a new company to try
to lower their employees' health costs, rattling health-care firm
stocks.
Amazon started building out its logistics network in earnest
after it missed deliveries during the all-important holiday season
in December 2013, according to people familiar with Amazon's
thinking. As more shoppers bought products online, Amazon
executives concluded that the rate of parcel growth was too large
for existing carriers to handle. Amazon also wanted to offer
two-day deliveries, seven days a week.
The company has separately launched a logistics service called
"FBA Onsite," according to the people familiar with the matter.
Currently, most third-party sellers on Amazon's website ship their
goods to an Amazon warehouse for its "Fulfillment by Amazon"
program to qualify for Prime shipping. With FBA Onsite, sellers
automatically qualify for Prime and then can ship directly from
their own warehouse using software provided by Amazon.
While Amazon will control the method of those shipments, pickups
and deliveries for now will still be handled by various carriers,
including UPS and FedEx, the people said. Bloomberg News earlier
reported on FBA Onsite.
For its "Shipping with Amazon" option, the online retail giant
is expected to be able to offer lower prices than UPS and FedEx
because it already delivers some of its own packages -- any extra
space it can fill in its trucks with additional deliveries is
considered added revenue, according to people familiar with the
company's thinking.
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
February 09, 2018 12:51 ET (17:51 GMT)
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