Amazon is testing an expansion of its delivery operations, including overseeing pickup and delivery of items from third-party seller warehouses to customers, possibly taking over some of the functions of long-time shipping partners like the United Parcel Service and FedEx, according to a Bloomberg News report.
Amazon didn’t specifically deny the report but issued a statement to GeekWire in response to questions about the reported plans, saying “We are using the same carrier partners to offer this program that we’ve used for years, including UPS, USPS and FedEx.”
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.
The goal of the program Amazon is reportedly experimenting with, which Bloomberg reports began in India two years ago and is being tested in western U.S. states, is to expand the breadth of items available under Amazon Prime. By better utilizing third-party warehouses, the program could also clear up logjams at Amazon’s growing network of fulfillment centers.
Bloomberg reports the name of the program is Seller Flex, and it is another example of Amazon’s push to help third-party sellers speed up their deliveries. It would go along with programs like Seller Fulfilled Prime and Fulfillment by Amazon, which lets third-party sellers send their goods to Amazon warehouses and get them under the Prime rapid delivery umbrella.
That Amazon might want greater control over the delivery process is not a big surprise. The convenience of rapid delivery has played an important role in Amazon’s rise in the retail world, so much so that other retail giants are building out similar networks. One of Amazon’s chief competitors, Walmart introduced free two-day shipping on millions of items for orders over $35 earlier this year. Just this week it purchased a New York company called Parcel to bolster same-day delivery in the Big Apple.
Shares of UPS and Fedex were both down this morning. Bloomberg cited analyst estimates that Amazon accounts for 5 to 10 percent of UPS revenue, and FedEx has said the retail giant makes up less than 3 percent of sales.
Amazon has invested heavily in its logistics network over the years and taken on losses to build it out. Amazon recorded an all-time high of nearly $7.2 billion lost on shipping in 2016, according to GeekWire’s analysis of the e-commerce giant’s financial results. The reason? Amazon CEO Jeff Bezos noted in the company’s year-end earnings release that more than 50 million items are now eligible for free two-day shipping, an increase of 73 percent from the previous year. On a call to discuss those earnings results in February, Amazon CFO Brian Olsavsky also noted a 40 percent increase in items shipped from the company’s warehouses for Amazon’s own online retail business and the Fulfillment by Amazon program.
“We’re doing fulfillment for ourselves and for our partners at a much greater clip,” Olsavsky said in February. “It’s the usual impact of the additional free shipping programs, as well as the shift toward a higher Amazon Fulfilled growth rate.”
As it has upped its emphasis on shipping it has taken greater control of deliveries. From Amazon Prime Air jets to its Flex service, where independent contractors deliver packages for Amazon, the company is employing more of its own solutions to complement traditional shippers like UPS and FedEx.