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Amazon set to introduce b2b delivery service in latest disruption move
March 24 2018, 07:50 | Alonzo Simpson
Report: Amazon Set To Launch UPS Killer Delivery Service For Businesses Soon
Cowen analyst Helane Becker wrote in an investor note Friday that worries about Amazon's push into the shipping world were "somewhat overblown", saying the complex delivery networks of FedEx and UPS were "highly hard to replicate".
As much as it makes sense to do this in urban areas, it is unlikely that Amazon will make a move on trying to service the American hinterland.
"There is tremendous opportunity in the business-to-customer market and more growth coming to the sector and UPS, irrespective of how other companies shift strategies", UPS spokesman Glenn Zaccara said.
Amazon as a customer accounts for less than 10 percent of total revenue for UPS and 4 percent of revenue for FedEx, according to Wolfe research.
Meanwhile, Amazon mentioned how shipping is critical to its business in its annual report. They will partner with third-party merchants who sell items through the Amazon site. Now there are reports that the online retailer is planning to come up with a delivery service for businesses to take on the biggies like FedEx and UPS.
We could also see SWA expand to other cities across the United States later on this year, so Amazon is definitely looking to hit the ground running with this. It also, of course, is looking to undercut FedEx and UPS when it comes to rates, because that's just what Amazon does.
Meanwhile, Amazon has leased 40 airplanes, begun arranging ocean freight shipments from China to the USA, and built up a corps of delivery drivers. The service is expected to start in Los Angeles and then expand.
Rumors have swirled for some time that Amazon has explored bringing some of its delivery services in house to take control of the process and avoid delays often seen around the holidays. Amazon already delivers, its own orders in 37 US cities, but still relies on the likes of the US Postal Service to fill in the gaps in its coverage. (NYSE:FDX) by 5.5% during the 4th quarter, according to the company in its most recent Form 13F filing with the Securities and Exchange Commission.
In addition, the shipping industry is a lucrative segment. The goal of such a service is literally to offer businesses the opportunity to have their packages picked up and deliver to those they have sold them to.
Shipping costs, which include sortation and delivery center and transportation costs, were $11.5 billion, $16.2 billion, and $21.7 billion in 2015, 2016, and 2017.
Amazon.com, Inc. shares rose $6.04 (+0.45%) in premarket trading Friday.