Amazon trialing new delivery system that makes FedEx and UPS obsolete

An employee stacks items to be shipped at the Amazon fulfillment center in Phoenix
Amazon said to be testing its own delivery service with expansion planned for 2018
Author

06 October, 2017

Amazon is testing a new delivery service for shipping goods for third parties that sell on its website, Bloomberg reported on October 5, citing unnamed sources.

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".

In fact, for FedEx and UPS, the "last mile" delivery-which is a big focus for Amazon fulfillment-is actually largely now carried out by the US Postal Service (USPS).

"Seller Flex would also give Seattle-based Amazon more visibility into the warehousing and delivery operations of its merchant partners, potentially helping it make full use of their product inventory, storage space and proximity to customers while still guaranteeing quick delivery".

Amazon reportedly began experimenting with the idea two years ago in India and has been slowly pitching the concept to US merchants.

As part of the service, Amazon will oversee the pickup of packages from warehouses of third-party merchants and the delivery of those packages to consumers, the report said.

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FedEx shares were down less than 1 percent.

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In 2013, a late rush of orders deep into the holiday shopping season caused FedEx and UPS to miss promised delivery dates.

Morningstar analyst Keith Schoonmaker downplayed Amazon's potential threat, saying the retailer constitutes a mid-single-digit proportion of earnings at UPS and low-single-digit at FedEx. Rather than relying on the delivery services, Amazon will pick up products from vendors and deliver them to customers.

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.

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

The test program, being held on the West Coast ahead of an expected national roll-out in 2018, is aimed at increasing the amount of goods available for two-day delivery. And they will still need FedEx and UPS to deliver for them.

Amazon has always been experimenting with making deliveries faster.

The program referenced by Amazon is Seller Fulfilled Prime, a service that lets third-party sellers slap the Amazon Prime two-day shipping badge on their products, with the caveat that they must meet Amazon shipping requirements. Online holiday spending in the USA will hit $129 billion this year, up 12 percent from a year ago, according to Forrester Research Inc.


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