Putting Jeff Bezos in a Super Bowl ad isn't the only major material business risk Amazon is taking in Q1.
After more than a year of anticipation as Amazon has expanded the number of its distribution centers, partnered with landlords to install designated Amazon lockers in mailrooms in millions of apartments across the US, creating a system to allow couriers to deliver packages inside customers' homes and experimented with delivery from third-party warehouses in some test markets, the e-commerce behemoth announced today that it will launch a "Shipping with Amazon" service that will entail picking up packages from businesses and shipping them to consumers, according to the Wall Street Journal, which cited unnamed sources familiar with the matter (ie AMZN's comms department).
The service will compete with ground carriers with UPS and FedEx, per Bloomberg:
- AMAZON PLANS TO LAUNCH 'SHIPPING WITH AMAZON' IN U.S. THIS YEAR, SOURCES SAY
- NEW AMAZON SHIPPING OPTION WOULD COMPETE WITH UPS AND FEDEX, SOURCES SAY
- 'SHIP WITH AMAZON' TO START IN LOS ANGELES FIRST, THEN GO NATIONWIDE, SOURCES SAY
Amazon expects to roll out the new delivery service in Los Angeles in coming weeks, partnering 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.
The first stirrings of the eventual launch first emerged last October when Amazon announced it would begin "experimenting" with a new program called "seller flex" that would allow them to take over the process of shipping from third-party warehouses. That program was first tested in the Los Angeles area.
as WSJ reminds us, this is the latest step by Amazon to create its own parcel network. In the last two years, Amazon has expanded into ocean freight while building a network of its own drivers who can now deliver inside homes and leased up to 40 aircraft while establishing an air cargo hub.
To be sure, the company already delivers orders from its own warehouses (these are the items that typically qualify as "Prime") in 37 different US cities.
“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.
For deliveries outside of its reach, the company will use the Postal Service and other carriers to take care of the so-called last mile to customers’ doorsteps.
Unsurprisingly, the stocks of private shipping companies FedEx and UPS are sinking pre-market on the news, with UPS down 7.1% and Fedex off 5.4%, while Amazon shares inched higher...
Of course, whether any of this will be successful remains to be seen: Amazon is starting from a significant disadvantage - FedEx and UPS have massive networks built up throughout the country - and UPS is spending $7 billion this year alone on maintenance and upgrades. But Amazon has a pretty solid track record of accomplishing what it sets out to do.
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 didn’t have an immediate comment. On the company’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 customer represented more than 3% of 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.
In addition to the delivery service, Amazon is also launching a new logistics service that will allow third-party warehouses to qualify for prime and ship goods from their own warehouses directly to customers instead of sending them to an Amazon Warehouse first for processing through its "Fulfillment by Amazon" program, using software provided by Amazon...
Amazon will exert a measure of control over these third party deliveries, allowing it to fill space on its trucks with extra third party items, adding valuable revenue. Though, for now, it will continue to use third party carriers like FedEx and UPS.