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Amazon reportedly launching a delivery service for businesses

Amazon reportedly launching a delivery service for businesses
Amazon has been edging into the delivery business for years to help cut losses from shipping costs. (Paul Sakuma / Associated Press)

Starting in Los Angeles, Amazon will launch a delivery service for businesses that could one day rival FedEx and UPS, it was reported Friday.

The service, called "Shipping With Amazon," will deliver goods sold by third-party vendors on the tech giant's e-commerce platform. It's expected to roll out in the coming weeks before expanding to other cities this year, unnamed sources told the Wall Street Journal.

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Amazon declined to address the report directly, but said in a statement: "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."

The service springs from a pilot program launched from warehouses next to Los Angeles International Airport, according to the Wall Street Journal.

Shares of FedEx and UPS slipped Friday on news of Amazon's venture.

Amazon has long shown interest in building its own logistics network that could challenge the established couriers. Doing so could eventually make the company more profitable through economies of scale. Amazon's shipping costs have mounted steadily in tandem with the company's growing sales.

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

"The danger for the traditional delivery firms is twofold. Firstly, they are likely to lose business from Amazon; this will be slow at first, but will accelerate as Amazon rolls out more of its own delivery services," Saunders wrote. "Secondly, if Amazon starts offering delivery to businesses, it will likely do this at a reduced rate."

Jim Corridore, an analyst for CFRA Research, said Amazon's entrance into the space will not be as disruptive as some may think.

"We think the current economic expansion and surging e-commerce volumes are able to support a new competitor," Corridore wrote. "At the same time, Amazon will find it costly and difficult to compete with the infrastructure of [FedEx] and UPS."

Reached for comment, UPS declined to weigh in on what Amazon's foray into delivery for businesses could mean for their bottom line.

"UPS continues to support Amazon and many other customers," the company said in a statement. "We don't make comments about their business strategies or decisions regarding their utilization of UPS services."

FedEx provided a terse statement that included a link to marketing and promotional material meant to highlight the company's vast global presence.

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

Delivery represents another enterprise for the protean company, which last week announced it was partnering with JPMorgan Chase & Co. and Berkshire Hathaway Inc. to launch a healthcare service for employees of the three companies.

In addition to its marketplace, Amazon also runs a thriving cloud computing arm, a Hollywood studio and a grocery business with its purchase of Whole Foods last year.

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News that Amazon may kick off its own delivery service comes one day after the Seattle-based company announced its Prime members will be able to get two-hour food delivery from Whole Foods, which the company acquired for nearly $14 billion.

Amazon has been edging into the delivery business for some time. In August 2016, the company unveiled its first branded cargo plane, one of 40 jetliners that were expected to make up its own air transportation network.

The Associated Press contributed to this report.

Twitter: @dhpierson

UPDATES:

10:10 a.m.: This article was updated with statements from Amazon, UPS and FedEx, as well as comments from CFRA Research analyst Jim Corridore.

9:34 a.m.: This article was updated with additional details.

9:23 a.m.: This article was updated with additional details.

9:06 a.m.: This article was updated with additional details.

This article was originally published at 7:35 a.m.

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