The service, which is known as “Shipping with Amazon”, is launching in Los Angeles and possibly other locations, a person who has knowledge of the program told Reuters. As investors got wind of the news, shares of both FedEx and UPS slid more than 4 percent on Friday (Feb. 9) afternoon
Still, the carriers – and analysts – are downplaying concerns that the experiment is a threat to the business of FedEx and UPS in the near future. Cowen and Co Analyst Helane Becker, for example, said that Amazon would have to spend an estimated $100 billion to build a network and acquire the equipment to go up against FedEx and UPS.
It was no secret that Amazon was building a delivery network. Amazon has already used its own trucks to move goods out of its warehouses and has worked to build up its logistics services in order to combat rising shipping costs through having its packages delivered through a third party.
In 2016, there were whispers of drones, planes and ships — and even remarks during Amazon’s earnings calls with analysts. The eCommerce giant had made it clear that it wants to rely less on third-party companies, like UPS, and instead invest more into building its own shipping empire.
A Wall Street Journal article in late 2015 cited interviews with current and former UPS and Amazon executives explaining the changing nature of that relationship as those costs continue to rise. The real draw for Amazon to get into the delivery game is to take control over its own delivery times, as eCommerce’s popularity increase strains the traditional delivery carriers. For example, Amazon used its own jets to help make deliveries following its Prime Day in 2017.