Why UPS and FedEx shouldn't fear an Amazon delivery service

Amazon said to be testing its own delivery service with expansion planned for 2018

Report: Amazon Is Toying With A New Delivery Service That Could Replace UPS And FedEx

As part of the service, Amazon will oversee pickup of packages from warehouses of third-party merchants and delivery to customers, the report said, which is now handled by UPS and FedEx.

The company has used other delivery services such as FedEx Corp. Specifically, it is dabbling in a program created to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to Bloomberg. The service began two years ago in India, and is now being tested in West Coast states, with a broader rollout planned in 2018, the report said. Specifically, Amazon will take a role in overseeing pickup of packages from third-party merchants who sell their products on Amazon.com along with the actual delivery of the products to customers.

"Amazon's final-mile efforts reflect a logical extension of its model as it builds network density", Benjamin Hartford, a Robert W. Baird analyst, said in a note. After all, Amazon is by far the e-commerce leader accounting for an estimated 40% of online sales in 2016.

FedEx shares were down less than 1 percent. If Amazon keeps expanding its e-commerce empire, saving on these deliveries could help out its bottom line, but in turn shave off some business from UPS and FedEx.

UPS and FedEx don't seem too concerned about the report. And with its latest actions, the company is getting closer to becoming a real challenger in two industries: delivery and apparel.

Amazon will now have full control of its eCommerce business if the company does launch its own delivery service.

It's important to remember that Amazon is not the only e-commerce game in town.

The big benefit for consumers is that Seller Flex will enable more products to be eligible for 2-day Prime shipping, which has obvious benefits for Amazon. And they will still need FedEx and UPS to deliver for them.

Amazon doesn't always offer the cheapest price for goods.

The online giant is experimenting with a program that rivals services handled by longtime partners UPS and FedEx. So what'll happen once they start shipping packages themselves?

The program referenced by Amazon is Seller Fulfilled Prime, a service that lets third-party sellers slap the Amazon Prime two-day shipping badge on their products, with the caveat that they must meet Amazon shipping requirements.

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