Amazon will soon enter the package delivery business.
It is being reported that within the next few weeks the online retail giant will launch a service called Shipping with Amazon, in which they will pick up and deliver customer packages. At first, the service will only be available in the Los Angeles area, but Amazon could add more cities this year. The service will also at first only be available to third party sellers at Amazon, but it could expand later to include other types of businesses.
The service coincides with the infrastructure Amazon is currently developing in order to deliver its own goods. Just through its Prime program alone it shipped in excess of 5 billion items in 2017. The company has already purchased more than three dozen cargo planes, dubbed Prime Air, for its new Kentucky cargo hub, and it has bought around 4,000 tractor trailers.
Amazon further runs a local, on-demand delivery service called Flex, and it also developing a drone delivery service, much like the ones that DHL and UPS are developing.
The retailer began building its own shipping infrastructure in the aftermath of the 2013 holiday season, when a significant number of its packages were delivered late by the shipping services they were using.
A spokesperson for Amazon would neither confirm nor deny the launching of Shipping for Amazon, but this person did say that the company is constantly experimenting with innovating ways to help growing businesses on their platform deliver goods to their customers faster and cheaper.
Analysts believe that Amazon will still depend on shipping services such as the United States Postal Service, FedEx and UPS. They believe this because, according to them, Amazon would have to considerably increase its shipping infrastructure in order to match what those other shipping services provide them.
Anthony Chukumba, who is an analyst for Loop Capital Markets, noted that while Amazon had 40 cargo planes, FedEx has more 650 planes. Similarly skeptical is Helane Becker, who is an analyst for Cowen. She said that it would be very difficult for Amazon to replicate the complex delivery networks of UPS and FedEx.
Both UPS and FedEx responded to news of Amazon’s new shipping service. UPS says that it will continue to support Amazon, without commenting specifically on the new service. At the same time, a FedEx spokesperson said that those behind the news reports do not understand how the shipping business truly works.