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Amazon will soon be adding a yard truck to its extensive assortment of warehouse equipment at its distribution centers. The online giant is preparing to launch a delivery service for businesses that will pit them head-to-head with established companies FedEx and UPS.
Shipping with Amazon
Amazon’s announcement of the new service initially caused stock prices for both FedEx and UPS to dip. While the current partnership between Amazon and UPS is expected to continue short-term, it’s unclear how it will be affected down the road.
The service, to be known as Shipping with Amazon, will begin by delivering shipments from the company’s third-party suppliers. Shipping with Amazon will kick off in the Los Angeles area before branching out.
Why Expand into Delivery?
Experts speculate that there are several reasons why Amazon is pursuing this new venture:
– Amazon’s lucrative Prime membership service offers free two-day shipping on specific items, but that perk is lost when customers order from a third-party supplier. By assuming more control, Amazon is hoping to drive additional customers to purchase a Prime membership.
– With the massive size of its operations, Amazon prefers to be as self-contained as possible. Taking charge of delivery service will minimize problems, such as delayed shipments during the last holiday season.
– Shipping causes a lot of red ink on Amazon’s books. In 2017, the company spent $20 billion getting orders to customers. That figure can be sharply reduced with in-house delivery.
– UPS recently reported quarterly revenues of $18.83 billion. Even for Amazon, it’s hard to resist the lure of that kind of money in their coffers.
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