Amazon Testing Own Delivery Service in Confidential Project

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Amazon reportedly began experimenting with the idea two years ago in India and has been slowly pitching the concept to USA merchants.

Amazon is calling this major expansion "Seller Flex", according to the sources. This service began on a trial basis on the West Coast earlier this year, expanding further in 2018.

Amazon declined to the comment on the matter.

Once again raising the specter of cutting out more business to UPS and FedEx, Amazon is reportedly testing a program that involves making local deliveries from the warehouses of retailers selling on its marketplace, according to a report from Bloomberg. "Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller".

The company will be overseeing pickup of packages from warehouses of third-party businesses who sell on Amazon Seller Central.

Amazon has invested heavily in its logistics network over the years and taken on losses to build it out. By doing so, Amazon is potentially taking business away from other delivery companies including UPS and FedEx.

The disruption that Amazon might cause has been downplayed by UPS in the past. If Amazon keeps expanding its e-commerce empire, saving on these deliveries could help out its bottom line, but in turn shave off some business from UPS and FedEx.

When asked whether UPS and FedEx investors should be concerned about Amazon entering the market, Cramer said "yes". Also handling its own deliveries would allow Amazon greater flexibility and ultimately let it save money. Amazon recorded an all-time high of almost $7.2 billion lost on shipping in 2016, according to GeekWire's analysis of the e-commerce giant's financial results. That centralized approach can create logjams, particularly during the busy holiday shopping season.

The goal of the program Amazon is reportedly experimenting with, which Bloomberg reports began in India two years ago and is being tested in western US states, is to expand the breadth of items available under Amazon Prime. And they will still need FedEx and UPS to deliver for them.

While FedEx and UPS don't disclose what percentage of revenue comes from Amazon, their exposure is below 10%, according to company representatives and analysts.

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