The online retail giant Amazon (NASDAQ: AMZN) is testing a new shipping service that could threaten the market share of traditional shipping companies like FedEx Corporation (NYSE: FDX) and United Parcel Service, Inc (NYSE: UPS). According to a report from the Wall Street Journal, Amazon plans to roll out a pilot version of the program, called Shipping With Amazon (SWA), in Los Angeles in coming weeks. A package-delivery service, Shipping With Amazon would see the company picking up packages directly from retailers and delivering them to consumers, reducing the need for third-party shipping companies. In response to the news, both FedEx and UPS saw their share prices fall on Friday.
Los Angeles, a sprawling, high-demand city, is frequently used as a testing site for Amazon's various delivery initiatives . After a trial run in Los Angeles, the company plans to eventually expand SWA to all thirty-seven U.S. cities in which it currently operates delivery services.
Shipping With Amazon would capitalize on Amazon's already vast network of third-party retailers. In the testing stage, the program will be available to certain registered third-party vendors, and will only become more widely offered to all retailers after further development.
Though it seems that Amazon is seeking to eventually compete directly with FedEx and UPS, the traditional shipping companies have so far appeared unconcerned by Amazon's most recent foray into the industry. "The headline in [the Feb. 9, 2017] Wall Street Journal demonstrates a lack of basic understanding of the full scale of the global transportation industry," said Patrick Fitzgerald, a senior marketing and communications executive for FedEx. Amazon has yet to build a shipping and logistics network of a comparable scale to those of FedEx and UPS.
In its pursuit of expansion, the electronic commerce company has lately ventured into new sectors, though it has continued to develop its shipping and logistics network alongside these initiatives. Its big June 2017 purchase of Whole Foods was the latest move in Amazon's growing involvement in food retail, which the company began exploring with AmazonFresh, its grocery delivery service launched last year.