Amazon May Deliver Gut Punch To UPS, FedEx

Amazon will reportedly launch delivery service to compete with UPS and FedEx

Amazon will launch a package-delivery service called "Shipping with Amazon", or SWA, according to a report from the Wall Street Journal. By taking some (or all) of that in-house, Amazon could conceivably better control those costs, especially if drone delivery becomes as widespread as the company hopes it will.

Amazon officials did not immediately reply to a Fortune request for comment, but we will update this article with their response.

Amazon already delivers to at least 37 USA cities, the Wall Street Journal notes.

With another holiday comes another new Starbucks latte. The company was caught off-guard by the crush of online shopping leading up to the season and said it must spend a chunk of its tax-cut savings to improve its package-delivery network. It also leases aircraft and ocean freight equipment to deliver its packages.

And although Amazon has upended a number of businesses in its 24 years, it has also had its share of missteps, including failed attempts to get into the auction and travel businesses. It had $178 billion in sales and $3 billion in profit past year and is sitting on more than $20 billion in cash.

There is "tremendous opportunity" in the shipment of goods from businesses to consumers and "more growth coming to the sector and UPS, irrespective of how other companies shift strategies", said Steve Gaut, a UPS spokesman. "This will be slow at first but will accelerate as Amazon rolls out more of its own delivery services", he said. Sanford C. Bernstein set a $236.00 price target on FedEx and gave the company a "hold" rating in a report on Wednesday, December 20th. "It appears to be a hard task to compete in this market as an asset light parcel delivery carrier", Citi analyst Christian Wetherbee said.

Under its Fulfillment by Amazon and other programmes, Amazon handles delivery of products that merchants store in the firm's warehouses, including to non-Amazon customers.

"The headline in today's Wall Street Journal demonstrates a lack of basic understanding of the full scale of the global transportation industry", said FedEx spokesman Patrick Fitzgerald.

The reaction was swift: Shares of FedEx and UPS stock fell as much as five per cent apiece, as investors fretted that Amazon's new service could chip away at revenue - and profits - for the country's largest delivery services. UPS declined to make an executive available for an interview.

When Amazon, Warren Buffett and the CEO of JPMorgan Chase announced two weeks ago that they were forming a company to tackle employer health care costs, it triggered a sell-off in the shares of established health insurers.

This week Amazon launched two-hour grocery delivery for Prime members from Whole Foods, which it bought last summer for almost $14 billion.

Shares of United Parcel Service Inc. and FedEx Corp. dropped around 3 percent in premarket trading, but both had sold off more severely earlier.

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