Amazon test could impact UPS

E-tail giant conducts pilot program, considers launching its own delivery service nationally.

The future for Sandy Springsbased UPS could shift significantly if Amazon launches its own delivery service nationally, a possibility raised by a report that the e-tailer is testing such a service on the West Coast.

Amazon’s experiment with delivery service is an effort to make more products available for free two-day delivery, according to a Bloomberg News report Thursday morning. It began the delivery service in India two years ago and has been marketing “to U.S. merchants in preparation for a national expansion,” Bloomberg reported, citing two people familiar with the plan who asked not to be identified because the U.S. pilot project is confidential.

Amazon offers free two-day delivery through its Prime membership. With the new service, according to the report, Amazon will oversee pickup of packages from warehouses of merchants that sell on Amazon.com followed by delivery to homes. That’s work often handled by UPS and FedEx today, Amazon could allow the seller to decide which delivery service to use, Bloomberg reported.

Amazon, for its part, said in a written statement: “We are using the same carrier partners to offer this program that we’ve used for years, including UPS, USPS and FedEx.”

Because Amazon is a major customer for UPS, a shift of the share of delivery it handles on its own could have a significant impact on UPS’s business.

Amazon had already leased a fleet of Boeing jets and announced an air cargo hub at Cincinnati’s airport, as well as a delivery system to deliver packages using drones. And it’s not unusual for retailers like Walmart to use both UPS and FedEx as well as their own logistics networks.

But Baird Equity Research senior research analyst Benjamin Hartford sent a note to investors calling the news about Amazon’s delivery service test another example “of Amazon’s encroachment on the broader logistics space.” UPS, because of the large portion of its business made up by its U.S. ground network and how large a customer Amazon is for UPS, has greater exposure to risk from Amazon’s efforts than

rival FedEx, according to Hartford.

In response, UPS called Amazon “a valued UPS customer.”

“We support all our customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future.” UPS said in a written statement. The company said it continues to see its revenue grow and profit margins improve, amid skyrocketing growth of online shopping and international expansion.

Separately in Georgia and other states around the country, economic development officials are working on efforts to compete for Amazon’s second headquarters. As part of a local pitch, the Stonecrest City Council this week voted to ask the Georgia General Assembly to form the city of Amazon.