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Sorry, Amazon Didn’t Miss You

0212_Amazon

Image source: Lutsenko_Oleksandr / Shutterstock.com

What's going on?

According to the Wall Street Journal, Amazon is preparing to launch a delivery service for other businesses – and stocks of UPS and FedEx were hit hard on Friday in response (tweet this).

What does this mean?

“Shipping with Amazon” will initially be piloted with third-party sellers that use Amazon’s platform; those companies will be able to take advantage of Amazon’s extensive, and growing, distribution network. Eventually, the program is expected to become available to businesses that don’t sell via Amazon, threatening standalone delivery companies for whom ecommerce has become an important source of revenue. The program was initially trialed in London, where Amazon-powered deliveries are now ubiquitous; the company currently relies heavily on other delivery services in the US.

Why should I care?

For markets: The threat is real for UPS and FedEx.

Amazon has been quietly ramping up spending on building out its delivery network in recent years. It already leases planes, it’s building an air cargo hub in Kentucky and it holds a license to ship goods across oceans (watch out below, Maersk…). It’s still years away from having a network that can rival those of the established logistics giants, but Amazon has now made clear that it’s coming for them – express delivery. In a sign of investors’ nervousness, the stock prices of UPS and Fedex fell about 2% on Friday following the news, even though the overall stock market rose.  


The bigger picture: Amazon’s reach is wide and growing.

Amazon now has a massive cloud computing division, a major Hollywood studio and a grocery chain by the name of Whole Foods. Last week it said it would team up with JPMorgan and Berkshire Hathaway to launch a healthcare company. Amazon’s continued expansion represents a clear and present danger to businesses in other industries (healthcare stocks also dropped on the news of the new joint venture). But it also may be a risk to Amazon itself, as its expanding power is unlikely to escape the attention of regulators intent on preventing its dominance from harming competition and, ultimately, the consumer.

Originally posted as part of the Finimize daily email.

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