The stock valuations of both FedEx and UPS were down as reports surfaced of a plan by Amazon to begin a new delivery service called Shipping with Amazon. Amazon, which has been delivering some of its own shipments in certain markets for a while, did not deny the report.
While some analysts stated that the move should ‘send shivers down the spines of traditional delivery companies’, others have taken a more skeptical view of the move, one stating that Amazon will need 30 billion dollars and 30 years to build out infrastructure comparable to those of UPS and FedEx.
DHL, a European company already well-versed in the complexities of logistics, tried to enter the US market in the early 2000s and threw in the towel after spending over 600 million dollars on equipment, buildings and employees.
Due to Amazon’s massive success over the past few years, people may tend to forget that there have been numerous failures, among them the Fire Phone, Amazon Wallet, Amazon WePay, and Endless.com.
According to the reports, the service will only be available initially in a single zip code in the Los Angeles area. Since Amazon has already been delivering some of its own packages, it already has a fleet of 40 cargo planes – which pales next to the almost 700 in FedEx’s fleet – but it’s a start, and offering the service in one small area at first allows Amazon to test various strategies before rolling the service out on a larger basis.
While none of this can be seen as good news for entrenched delivery companies, it’ll be a while (if ever) before it materially affects their profitability.