Amazon plans to test its own delivery service

Amazon.com is experimenting with a new delivery service intended to make more products available for free two-day delivery and relieve overcrowding in its warehouses, according to two people familiar with the plan, which will push the online retailer deeper into functions handled by longtime partners United Parcel Service Inc. and FedEx Corp.

The service began two years ago in India, and Amazon has been slowly marketing it to U.S. merchants in preparation for a national expansion, said the people, who asked not to be identified because the U.S. pilot project is confidential. Amazon is calling the project Seller Flex, one person said. The service began on a trial basis this year in West Coast states with a broader rollout planned in 2018, the people said. Amazon declined to comment.

Amazon will oversee pickup of packages from warehouses of third-party merchants selling goods on Amazon.com and their delivery to customers’ homes, the people said — work that is now often handled by UPS and FedEx. Amazon could still use these couriers for delivery, but the company will decide how a package is sent instead of leaving it up to the seller.

Handling more deliveries itself would give Amazon greater flexibility and control over the last mile to shoppers’ doorsteps, let it save money through volume discounts, and help avoid congestion in its own warehouses by keeping merchandise in the outside sellers’ own facilities.

“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. FedEx and UPS shares were likely to come under pressure, however, since investors could be concerned about another “data point of Amazon’s encroachment on the broader logistics space,” he said.

“Amazon is a valued UPS customer,” said Steve Gaut, a UPS spokesman. “We support all our customers with industry-leading ecommerce solutions and expect to expand these relationships further in the future.”

FedEx said it wouldn’t comment on Amazon’s plans but pointed out the “scale, infrastructure and complexity” involved in running a global transportation network. The company said it’s innovating in ways related to new services for e-commerce residential deliveries, but noted that is “only one piece of the capabilities that we provide.”

Mark Lennihan / Associated Press A package from Amazon Prime is loaded for delivery on a UPS truck in New York. Amazon.com is said to be experimenting with a new delivery service.