Amazon launching shipping service to compete with UPS, FedEx

Amazon launching shipping service to compete with UPS, FedEx

Thus far, despite operating an elaborate network of fulfillment, sortation and delivery centers, Amazon has ceded control over the "last mile" to the companies it now looks set to start competing with.

Amazon prepares to launch its own courier service for businesses, positioning itself at competitors like UPS and FedEx. However, Money also notes that with $178 billion in sales and $3 billion in profit a year ago, along with cash reserves estimated to be more than $20 billion in cash, Amazon is uniquely placed to launch its own air and land P&D service should Bezos give the marching orders.

Amazon now records big losses on shipping.

Amazon has already shown that it can rattle the retail, grocery and health insurance industries, and now it is doing the same in the delivery business.

Neither UPS nor FedEx seems to be especially taken aback by this, based on their non-comment comments in the WSJ report.

"They can buy planes, trains and automobiles, but until they stop shipping so much air, I don't see Amazon improving internal shipping profitability", said Paula Rosenblum, managing partner at RSR Research. By taking over the entire delivery process, Amazon can ensure cheaper operations as well as higher customer satisfaction with on-time deliveries.

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FedEx, UPS and Amazon shares were all down Friday, while the market posted a modest gain. "Firstly, they are likely to lose business from Amazon; this will be slow at first but will accelerate as Amazon rolls out more of its own delivery services", Saunders wrote.

In turn, Amazon handed out scores of gift cards and refunded shipping costs to affected customers.

According to online statistics company Statista, Amazon's shipping revenue in 2016 was $8.98 billion while its outbound shipping costs were $16.17 billion. According to a senior research analyst at Loop Capital Markets, Anthony Chukumba, Amazon would need 30 years as well as at least $30 billion to recreate the scale of operations that FedEx and UPS now have.

As pointed out by Fortune, Shipping With Amazon doesn't just save money, it gives Amazon greater logistical control over third party sellers. To do this, Amazon sends their own truck to pick up the sellers' products. The one-off shipments of random items are harder for the company to scale and lead to higher shipping costs. According to the information, this new service is named "Shipping with Amazon".

And once again, experts are pouring cold water on the concept of Amazon creating a national logistics network that can take sizeable volume away from the major carriers and the U.S. Postal Service.

As Amazon continues to grow, its logistics costs have skyrocketed over the past decade.

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