Amazon in the Parcel Delivery Business- Really?

Hot off the presses, Amazon has announced that they will be launching a delivery service for businesses which will compete directly with FedEx and UPS.  If anyone is surprised by this news, they must have been sleeping under a rock for the past several years.  For some time now,  Amazon has been delivering many of its own packages as a prelude to jumping into the parcel delivery business for commercial and residential customers

The new service called Shipping With Amazon, or SWA, will start delivery operations in Los Angeles in the coming weeks providing delivery services in coordination with several merchants who sell their goods through the Amazon marketplace.  After this initial phase, Amazon will roll the program out to other cities which are expected to be added later on in 2018.  The expanded services will involve picking up and delivering packages for businesses that do not do business with Amazon, thereby directly competing with both FedEx and UPS.

And, it should also come as no surprise that SWA intends to undercut UPS and FedEx on price in an effort to compete head on with the current FedEx/UPS duopoly, something shippers have been salivating for over the past 20 years or so.  SWA however did not offer any specifics on pricing in this current announcement.

Amazon has been building this delivery network in bits and pieces for years now, including pilot testing SWA in London, expanding into the ocean freight business as an NVOCC, building a network of their own drivers who have the ability to make “in-home” deliveries, leasing some 40 aircraft and establishing a new cargo hub to ensure successful delivery operations.

For their part, (at least publicly), both FedEx and UPS do not appear to be overly concerned at this point.  Both companies have many battle scars from years of continually building and strengthening global networks and they both fully understand the financial resources required to be invested to be successful in this very competitive business.  However, we suspect down deep UPS and FedEx fully understand that Amazon, (SWA) certainly has the will and we believe the financial resources to actually be a competitive force in the parcel delivery marketplace.

One does have to wonder however, with Amazon’s current growth into cloud computing services, a Hollywood studio, grocery retail and home delivery services and now their desire to build a strong alternative for their employees medical costs with JP Morgan Chase and Berkshire Hathaway, are they spreading themselves too thin to accomplish all of these initiatives?  Only time will tell, however if the past is any indication of the future, when Jeff Bezos and Company put their minds to something they usually are successful and we believe they will be successful with their new SWA business.