Depending on how the test goes, though, the service could expand to include more sellers in more areas and allow sellers that do not store their inventory in Amazon warehouses to ship orders entirely through Amazon's own delivery network, bypassing other carriers. Vanguard Group Inc. now owns 18,490,065 shares of the shipping service provider's stock valued at $4,018,446,000 after buying an additional 492,840 shares in the last quarter. Shipping costs at Amazon previous year rose 34 percent to $21.7 billion, according to Amazon filings.
FedEx, UPS and analysts played down the idea that a trial poses a near-term threat to the couriers' businesses. As always, take this report with a grain of salt, but if Amazon is really planning on launching SWA in LA within the next few weeks, we should know if these rumors are legitimate soon enough.
Amazon's interest in the delivery business has been percolating ever since many Amazon packages were delivered late around Christmas in 2013.
"There is tremendous opportunity in the business-to-customer market (i.e. Walmart to household deliveries) and more growth coming to the sector and UPS, irrespective of how other companies shift strategies", UPS spokesman Glenn Zaccara said.
Although Los Angeles is something of a trial, Amazon is likely to roll out the service to other USA cities later this year.
Cowen analyst Helane Becker wrote in an investor note Friday that worries about Amazon's push into the shipping world were "somewhat overblown", saying the complex delivery networks of FedEx and UPS were "highly hard to replicate".
While some pundits have suggested that Amazon is on a course to kill FedEx and UPS, the reality is more complicated.
And that's really where we already are; Amazon has just only declared lazy war on the parcel delivery industry and we are already begging for Bezos to show mercy.
"The danger for the traditional delivery firms is twofold".
A delivery service would also help the company cut costs and have better control of logistics. Bypassing third-party shippers like UPS and FedEx could save Amazon $1.1 billion annually, Citigroup analysts said in 2016. Earlier, Amazon announced it will be making Whole Foods deliveries (which it acquired in July) within a 2-hour window.
Amazon may try to offer cheaper prices than its imminent competitors, undercutting them in the process, reports TheWSJ.