Amazon Launching Delivery Service to Rival UPS, FedEx

Amazon.com is preparing to launch a delivery service for businesses, positioning it to compete directly with UPS and FedEx, according to a Feb. 9 Reuters report. Dubbed "Shipping with Amazon," or SWA, the new service will enable the online retail giant to pick up packages from businesses and ship them to consumers. Amazon will roll out a test of the service in Los Angeles in the coming weeks. Under the new process, Amazon sends a truck to pick up sellers’ products, which then takes inventory either directly to an Amazon fulfillment center or to the U.S. Postal Service or to couriers like FedEx, depending on what’s most cost effective, said Reuters. Shipping with Amazon is currently intended for select third-party sellers in the test, not for businesses in general, and still isn't yet ready to roll out widely to sellers on Amazon.

Total Retail's Take: Why in the world would the largest online retailer in North America set its sights on creating a shipping and delivery service, one of the most labyrinthine industries in the world? According to Amazon's latest regulatory filing, it make perfect sense: it's the cost, stupid. According to its 10-K for 2017, Amazon outlined the multibillion dollar cost of making good on its free shipping offers. “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." In addition, Amazon’s shipping ambitions reportedly took root in December 2013 when missed deliveries during that holiday season prompted the company to begin taking a closer look at its logistics network. It will be interesting to see if Amazon can disrupt the shipping and delivery industry, and what this may mean for the futures of FedEx and UPS. (The news sent shares of both carriers lower on Friday.)