|Look out, FedEx and UPS: Amazon plans to launch its own delivery service soon|
Amazon.com Inc. is finally gearing up to launch its long-rumored push to become a shipping provider.
That’s according to a Wall Street Journal report published this morning, which claims the retail giant plans to roll out a new package delivery service in the coming weeks. The operation is set run under the brand “Shipping with Amazon” and will first become available in Los Angeles before expanding to other cities.
Initially, Amazon will reportedly carry out deliveries only for merchants that sell goods via its platform. The Journal’s sources said the company intends to make the service available for other organizations as well further down the road. According to the tipsters, Amazon hopes to lure customers away from FedEx Corp. and UPS Inc. by offering lower prices.
The report sent the two delivery giants stock sliding more than 3.5 percent this morning. The reason for investors’ concern is twofold: Amazon has a long track record of successfully shaking up traditional industries, and it also happens to be among the top buyers of package delivery services in the U.S.
Analysts at Cowen and Co. LLC said in a note today that the retail giant is estimated to account for about 10 percent of UPS’ total sales. FedEx, meanwhile, generates about 3 percent of its revenue from Amazon deliveries, according to the brokerage firm, which sees varying impacts from the Amazon move.
“The complex global delivery networks of FedEx (and UPS) are highly difficult to replicate,” wrote Cowen analyst Helane Becker. “We believe the weakness in the shares of FedEx today presents an attractive buying opportunity for investors. We believe Amazon is UPS’s largest customer, and would be more impacted by a loss of volume.”
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