Amazon Experimenting With Its Own Delivery Service To Rival FedEx And UPS

by Tyler Durden

Oct 5, 2017 9:20 AM

Taking another bite out of the fortune they’ve built for FedEx and UPS shareholders, Bloomberg is reporting today that Amazon is “experimenting” with a new program, called “Seller Flex,” which would have them takeover the process of picking up packages directly from third-party warehouses and delivering them to customers.

Amazon.com Inc. is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to two people familiar with the plan, which will push the online retailer deeper into functions handled by longtime partners United Parcel Service Inc. and FedEx Corp.

The service began two years ago in India, and Amazon has been slowly marketing it to U.S. merchants in preparation for a national expansion, said the people, who asked not to be identified because the U.S. pilot project is confidential. Amazon is calling the project Seller Flex, one person said. The service began on a trial basis this year in West Coast states with a broader rollout planned in 2018, the people said. Amazon declined to comment.

Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, the people said — work that is now often handled by UPS and FedEx. Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller.

Not surprisingly, FedEx and UPS investors were not thrilled with the encroachment on their business…though we’re sure they’ll ditch their ephemeral bout of depression and push the stocks to brand new highs by the afternoon.  Just another opportunity to BTFD.

Of course, with the company spending nearly $20 billion per year on fulfillment expenses, it’s hardly a surprise that they’rerelentlessly looking at everything from their own drones to a fleet of cargo jets to deliver packages faster and at lower costs to their end consumers.

Amazon increasingly wants a direct hand in the path from one-click purchase to Main Street. There is the company’s homegrown drone project, which for now is more marketing stunt than reality. Amazon hires its own employees or contractors for expedited deliveries to Prime members in select cities. Amazon has tested using its own delivery trucks in some places, either to drive among the company’s warehouses or for the routes to shoppers’ homes. The company has opened a couple dozen package sorting centers to organize deliveries and expanded by 13 percent this year the number of warehouses to get goods closer to population centers. The sorting centers let the company “control a lot more of our shipments for longer,” Amazon’s CFO has said.

Control of the delivery process is Amazon’s obsession. Now the company is negotiating to lease 20 cargo jets, according to the Seattle Times, again with the ambition of having more autonomy over a part of the delivery path typically handled by shippers such as UPS and FedEx.

Seller Flex would also give Seattle-based Amazon more visibility into the warehousing and delivery operations of its merchant partners, potentially helping it make full use of their product inventory, storage space and proximity to customers while still guaranteeing quick delivery.

The project underscores Amazon’s ambitions to expand its logistics operations and wean itself off the delivery networks of UPS and FedEx. A rush of last-minute holiday orders in 2013 forced Amazon to issue refunds to shoppers who didn’t get gifts in time, highlighting the perils of being overly dependent on partners for a main part of its business pledge — quick, reliable delivery.

Will a new internal logistics company be just enough to once again thrust Jeff Bezos to the top of the world’s wealthiest leader board?