After a report from the Wall Street Journal that online giant Amazon is about to begin an express delivery service Los Angeles, share prices in UPS and FedEx fell sharply this week.
While Amazon has long had a delivery service for its retail marketplace customers, the news that it might be delivering for non-customers worried shareholders in the major express delivery players.
Amazon has trialled a delivery service for non-FBA-customers in part of Los Angeles. The Wall Street Journal report suggested that this pilot was successful and the company is planning to roll the scheme out across LA and Orange County.
There have been rumours swirling around that Amazon have been looking at doing the same thing in the UK. It has been running a scheme originally called Seller Flex but now renamed ‘Onsite FBA’ for Amazon marketplace sellers who warehouse their goods at their own premises. It is only a short hop from this position to move toward direct delivery for companies without a presence on the marketplace.
When the news came of the LA delivery plans, UPS stock plunged by 5% and FedEx by 6.5%. Moves to take on the UK market could damage Royal Mail’s business significantly too. However, it has been noted that Amazon’s existing parcel delivery volumes are so high in the US and UK that it can’t manage to deliver all its daily parcels with the logistics network it has. To be the threat that investors fear, the firm would have to extend its delivery fleets significantly to manage its own throughput and then significantly more to be the threat its rivals fear.