Amazon is reportedly testing its own delivery service, and that news isn’t sitting too well with investors in UPS and FedEx.
Stocks for both of the two package delivery companies dipped on Thursday following a report from Bloomberg, citing anonymous sources saying that Amazon is looking at an expanded rollout of its own delivery service by 2018. While the e-commerce giant currently partners with both FedEx and UPS for most of the two-day deliveries for its Amazon Prime customers, Bloomberg notes that Amazon wants to make more of its products available for two-day delivery while also freeing up some space in its overcrowded warehouses.
Both FedEx and UPS saw their share prices decline by more than 2% in early Thursday trading before rebounding slightly this afternoon. The service Amazon is reportedly testing would see the company pick up packages from third-party merchants directly before delivering them to customers, which is the role FedEx and UPS currently fill. The move would also likely reduce Amazon’s massive spending on deliveries amid ever-increasing shipping costs.
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Such an in-house service would obviously put Amazon in more direct competition with longtime partners FedEx and UPS, though it would also be a move the company has been hinting at for some time. Amazon has been fulfilling its own two-day deliveries in India since 2015, and Bloomberg reports that the company has been testing the service in some West Coast markets in the U.S. With the goal of expanding nationally sometime next year.
Amazon has also been experimenting with drone deliveries in recent years, and it acquired French shipping company Colis Privé in a move seen as yet another precursor to an eventual challenge to package delivery giants like FedEx and UPS. Meanwhile, delivery is far from the only market where Amazon is seen as a threat to established players, as the e-commerce giant has already disrupted the traditional retail industry and recently made big pushes into the grocery and meal kit industries, with its purchase of Whole Foods Market.