Once again raising the specter of cutting out more business to UPS and FedEx, Amazon is reportedly testing a program that involves making local deliveries from the warehouses of retailers selling on its marketplace, according to a report from Bloomberg.
Shares of delivery companies such as FedEx and UPS are falling as investors become anxious that the delivery service of Amazon.com is set to disrupt the entire industry. Using the service means Amazon would go to a non-Amazon warehouse and pick up the products a customer ordered through a merchant and deliver them.
Two years ago, Amazon rolled out a service in India which saw the company handle deliveries for other merchants with products stored outside of Amazon's network.
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. You can read the full story here. The move would also likely reduce Amazon's massive spending on deliveries amid ever-increasing shipping costs.
Whether this is bad news for UPS and FedEx remains to be seen.
Amazon is calling the project Seller Flex, according to Bloomberg, which cited a person familiar with the test.
Amazon's losses from shipping were $7.2 billion in 2016. It would also essentially expand the number of Amazon's distribution centers to include all seller's warehouses. The company issued refunds to many shoppers and may have signaled that it is too dependent on shipping partners during its busiest times. "If Amazon does take a few customers, the whole e-commerce pie is growing so fast that FedEx and UPS won't miss a beat".
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.
Amazon doesn't always offer the cheapest price for goods.
Amazon accounts for 5 percent to 10 percent of UPS revenue, according to analyst estimates, while FedEx has said the e-commerce giant accounts for less than 3 percent of its sales.
But the popularity of this service strains Amazon's capacity during the end-of-year holidays.