Shipping shakeup? Amazon may deliver its own packages - Tucson News Now

Shipping shakeup? Amazon may deliver its own packages

(AP Photo/Patrick Semansky). In this Nov. 20, 2015 picture, a UPS airplane is unloaded at the company's Worldport hub in Louisville, Ky. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a repor... (AP Photo/Patrick Semansky). In this Nov. 20, 2015 picture, a UPS airplane is unloaded at the company's Worldport hub in Louisville, Ky. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a repor...
(AP Photo/Mark Lennihan, File). FILE- In this May 9, 2017, file photo, a package from Amazon Prime is loaded for delivery on a UPS truck, in New York. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading fol... (AP Photo/Mark Lennihan, File). FILE- In this May 9, 2017, file photo, a package from Amazon Prime is loaded for delivery on a UPS truck, in New York. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading fol...
(AP Photo/Patrick Semansky). In this Nov. 20, 2015 picture, UPS airplanes sit on a tarmac at the company's Worldport hub in Louisville, Ky. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a re... (AP Photo/Patrick Semansky). In this Nov. 20, 2015 picture, UPS airplanes sit on a tarmac at the company's Worldport hub in Louisville, Ky. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a re...
(AP Photo/Mark Lennihan, File). In this Tuesday, Aug. 22, 2017, photo, FedEx trucks are parked in New York. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a report that powerhouse Amazon is r... (AP Photo/Mark Lennihan, File). In this Tuesday, Aug. 22, 2017, photo, FedEx trucks are parked in New York. Shares of delivery companies FedEx and UPS are falling in Friday, Feb. 9, 2018, premarket trading following a report that powerhouse Amazon is r...

By DAVID KOENIG and JOSEPH PISANI
Associated Press

Amazon has already shown that it can rattle the retail, grocery and health insurance industries, and now it is doing the same in the delivery business.

The online retailer is reportedly planning a new service to pick up packages from businesses and deliver them to consumers.

The service, called "Shipping With Amazon," is expected to start in Los Angeles in the coming weeks and roll out more broadly as soon as this year, according to The Wall Street Journal , which cited anonymous sources.

Amazon, which has been edging into the delivery business for some time, would not confirm the report - but didn't deny it either.

"We're always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices," said Amazon spokeswoman Kristen Kish.

Shares of delivery giants UPS and FedEx slipped Friday, but so did Amazon's stock as analysts expressed caution about the difficulty of building a competitive delivery network.

Amazon's interest in the delivery business has been percolating ever since many Amazon packages were delivered late around Christmas in 2013. Amazon has helped fuel the boom in online shopping, but all those millions of packages are straining the networks of UPS and FedEx. Amazon also uses the U.S. Postal Service and smaller delivery companies.

UPS had a rocky holiday season late last year, as it underestimated the crush of online shopping during so-called cyber week right after Thanksgiving. The Atlanta-based company plans to spend a chunk of its tax-cut savings to improve its network.

Meanwhile, Amazon has leased 40 airplanes, begun arranging ocean freight shipments from China to the U.S., and built up a corps of delivery drivers.

Executives at UPS and FedEx have downplayed the Amazon threat before, saying that it would take a massive investment over a long time to build an air and ground network to rival theirs.

There is little doubt, however, that Seattle-based Amazon has the means to build a bigger network. It had $178 billion in sales and $3 billion in profit last year and is sitting on more than $20 billion in cash.

An Amazon entry would "send shivers down the spines of the traditional delivery companies," said Neil Saunders, managing director of GlobalData Retail.

Saunders said the delivery companies are likely to lose business from Amazon - slowly at first, then more quickly as Amazon builds out its own operation. And if Amazon starts delivering to businesses, it may undercut the incumbents on rates, he said.

Analysts estimate that UPS gets up to 6 percent of revenue from Amazon deliveries compared to about 3 percent for FedEx. Several took a wait-and-see approach to the Amazon threat.

Deutsche Bank analysts wrote that "one pilot program, in one city, is being extrapolated as a clear and present risk to a global network" that delivers 33 million packages a day, more than 20 times Amazon's estimated delivery volume. They were "highly skeptical" of much risk to UPS and FedEx.

Citi analyst Christian Weatherbee said Amazon hasn't yet committed significant assets to a new delivery program.

"We don't want to present the case that Amazon will never, or could never, compete directly with FedEx, UPS" and the post office, Weatherbee said, but there is no indication that the company has bought enough trucks and hired enough drivers to take on UPS and FedEx, which would be a "difficult task," he said.

Amazon is likely to remain a major customer for UPS and FedEx for quite some time, complicating their relationship.

UBS Securities analyst Thomas Wadewitz said as "frenemy" Amazon expands on their turf, it could make sense for UPS and FedEx to significantly raise prices with Amazon, although there is no evidence to show they'll do that.

Others think Amazon may be trying to talk down delivery rates and get better service. Stifel analyst David Ross said Amazon will grow its logistics business but won't be able - and may not even want - to handle all of its own deliveries.

FedEx spokesman Patrick Fitzgerald said the Journal headline showed a "lack of basic understanding of the full scale of the global transportation industry."

UPS spokesman Steve Gaut said in statement that the company "continues to support Amazon and many other customers," and doesn't comment about their business strategies or decisions on how they use UPS services. UPS declined to make an executive available for an interview.

Amazon's muscle and influence beyond retailing have been very evident lately.

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 nearly $14 billion.

Amazon shares fell $10.90 to close at $1,339.60; United Parcel Service Inc. dropped $2.89, or 2.6 percent, to $106.39; and FedEx Corp. fell $3.95, or 1.7 percent, to $235.32.

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

  • NationalMore>>

  • Science Says: European art scene began with Neanderthals

    Science Says: European art scene began with Neanderthals

    Thursday, February 22 2018 2:14 PM EST2018-02-22 19:14:21 GMT
    Thursday, February 22 2018 3:07 PM EST2018-02-22 20:07:25 GMT
    Two new studies from Spain provide the strongest evidence yet that Neanderthals created art.
    Two new studies from Spain provide the strongest evidence yet that Neanderthals created art.
  • Billy Graham will lie in honor in the US Capitol Rotunda

    Billy Graham will lie in honor in the US Capitol Rotunda

    Wednesday, February 21 2018 11:05 PM EST2018-02-22 04:05:14 GMT
    Thursday, February 22 2018 3:07 PM EST2018-02-22 20:07:20 GMT
    (AP Photo/Henny Ray Abrams). FILE - In this June 26, 2005 file photo, the Rev. Billy Graham speaks on stage on the third and last day of his farewell American revival in the Queens borough of New York.  A spokesman said on Graham has died at his home i...(AP Photo/Henny Ray Abrams). FILE - In this June 26, 2005 file photo, the Rev. Billy Graham speaks on stage on the third and last day of his farewell American revival in the Queens borough of New York. A spokesman said on Graham has died at his home i...

    The Rev. Billy Graham, who was known as "America's Pastor," has died at his North Carolina home at 99.

    The Rev. Billy Graham, who was known as "America's Pastor," has died at his North Carolina home at 99.

  • Satellites see big fishing's footprint on the high seas

    Satellites see big fishing's footprint on the high seas

    Thursday, February 22 2018 2:14 PM EST2018-02-22 19:14:10 GMT
    Thursday, February 22 2018 3:07 PM EST2018-02-22 20:07:03 GMT
    (Global Fishing Watch via AP). This image provided by Global Fishing Watch shows fishing activity around the world in 2016. According to a study released Thursday, Feb. 22, 2018, researchers found more than 55 percent of the world’s oceans are fished c...(Global Fishing Watch via AP). This image provided by Global Fishing Watch shows fishing activity around the world in 2016. According to a study released Thursday, Feb. 22, 2018, researchers found more than 55 percent of the world’s oceans are fished c...
    A new global study gives the first comprehensive snapshot of how extensive industrial fishing is.
    A new global study gives the first comprehensive snapshot of how extensive industrial fishing is.
Powered by Frankly