"Shipping With Amazon" May Mean Big Problems for Shipping Firms

Source UPS

An article published by the Wall Street Journal last week has re-ignited the speculation that Amazon is looking to launch a delivery service that would compete directly with the big integrators.

Starting small and only working with its own business customers fits with Amazon's usual approach of testing on itself and small groups of customers before expanding to larger markets.

Amazon last week launched Prime Now, a two-hour delivery service for its Whole Foods Markets.

Previous year it announced a $1.4 billion investment at the airport that's expected to be its primary air freight hub, leasing more than 900 acres for a facility that will eventually support more than 100 Amazon Air planes and employ more than 2,700 people.

It remains to be seen if Amazon is willing to make the hefty investments needed to build a full-blown shipping and delivery service.

UPS and FedEx declined to comment on Amazon's specific strategies or decisions regarding the utilization of their services. This has led some industry watchers to speculate the latest moves by Bezos and Amazon are meant to leverage better shipping rates and service from shippers. But the carriers are certainly eyeing it warily and investors have gotten spooked, even if Amazon reportedly represents a low-single-digits percentage of business for both. Amazon has since become the sole owner of the French company.

Shipping with Amazon will also be known by the acronym SWA.

On the surface, it may seem like Amazon is on a quest for retribution but at least for the time being, I think Amazon's venture into shipping is more about self-preservation. The company's per package volume rose by about 4.5 percent to 5.08 billion.

UPS expected to deliver 750 million packages during last year's holiday season, it said in December - 40 million more than its year-before shipments of 712 million packages. This is just one of many live Amazon seller training videos recently released by Amazing.com.

"They can buy planes, trains and automobiles, but until they stop shipping so much air, I don't see Amazon improving internal shipping profitability", said Paula Rosenblum, managing partner at RSR Research. Amazon is so tech-savvy, organized and disciplined that if you aren't tightly controlling operations and using data effectively, you aren't going to stand a chance when Amazon launches SWA. "Shipping with Amazon" is now intended for select third-party sellers in the test, not for businesses in general, and still it is not yet ready to roll out widely to sellers on Amazon, said the person. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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