FedEx and UPS dip after report on Amazon's delivery concept

Posted October 06, 2017

Amazon is testing a new delivery option for third-party sellers, which would increase Amazon's role in the logistics chain at the expense of UPS and FedEx, its long-time shipping partners.

The new program, reportedly called Seller Flex, began testing in India and has now begun on the West coast, the news organization reported, with Amazon letting more merchants know in advance of a broader rollout.

The new experiment is meant to make more products available for free-two day shipping and relieve overcrowding in its warehouses, Bloomberg reported. It would go along with programs like Seller Fulfilled Prime and Fulfillment by Amazon, which lets third-party sellers send their goods to Amazon warehouses and get them under the Prime rapid delivery umbrella.

Its Fulfillment by Amazon offering already lets merchants ship goods to Amazon warehouses around the USA, where they can be stored, packed and shipped to customers. There are many sellers on Amazon Central who use P.O. boxes for returns, and UPS does not deliver to P.O. boxes.

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Amazon will now have full control of its eCommerce business if the company does launch its own delivery service. The company is not commenting on the report. That's why the fashion industry is just one among many on edge as it awaits Amazon's next move, especially since the e-commerce giant has made no secret of its apparel aspirations. And they will still need FedEx and UPS to deliver for them.

Shares at Amazon have outperformed the delivery companies thus far in 2017, as the giant of e-commerce is up by 29% through the first nine months, while UPS is up 4% and FedEx up 19%.

Amazon doesn't always offer the cheapest price for goods. It built a network of "sortation centers" around the country, where packages are sorted by zip code and trucked to post offices, with the U.S. Postal Service handling the final mile of delivery since it already has workers bringing mail to every home in the country. It involves Amazon picking up products from third-party sellers and shipping them to customers, rather than having third-party sellers handle the entire shipping process themselves.

But the popularity of this service strains Amazon's capacity during the end-of-year holidays.