FedEx and UPS executives have to be waking up this morning with a little more concerns on their mind than what they are accustomed to. The reason? Amazon appears posed to jump into the markets that they have dominated for so long.
CNBC reports that Amazon has announced that it will begin offering a business delivery service called “Shipping with Amazon”. The purpose of such a service is literally to offer businesses the opportunity to have their packages picked up and deliver to those they have sold them to.
This is big news for a lot of companies that may currently rely on UPS or FedEx to make most of their deliveries. Those have been the two major carriers (with a few minor ones sprinkled in) who have dominated the parcel delivery service for decades. Now, both companies appear to be under at least a little bit of pressure as their stocks were trading down in the pre-markets today (Friday February 9th, 2018).
Amazon is expected to roll out this new service in Los Angeles in the beginning. They will partner with third-party merchants who sell items through the Amazon site. They will deliver those items to the customers who have made those purchases. This will be their way of sort of test showcasing it before they roll it out to the rest of the country and eventually other parts of the world most likely.
UPS has come out and said that they are still a partner of Amazon and will continue to take their packages. They also say that they do not comment in public about the strategies or business practices of other companies. That is their way of deflecting the questions that have come up about how they will compete with the likes of Amazon in the parcel delivery game.
FedEx has been mum on the topic since this news was first announced. It has not mattered that much what either company has said or not said, they both have seen their shares fall regardless.
It is a common pattern to have shares of industry players fall when Amazon announces that it is exploring getting involved with that industry. Investors simply believe that Amazon will eat the lunch of those who have been around for a while. They do often dominate fields that they get involved in. Therefore, FedEx and UPS shareholders ought to carefully consider this information and their position in those companies.