Amazon’s plans for its own delivery service for businesses could transform the competitive landscape for Sandy Springs-based UPS.
UPS said it still has plenty of opportunity for growth as e-commerce expands.
The shipping giant said it “continues to support Amazon and many other customers,” and declined to comment on Amazon’s business strategies or decisions on their use of UPS. But UPS also pointed to its 8 percent revenue growth in 2017.
“There is tremendous opportunity” in the business-to-consumer market, according to UPS, “and more growth coming to the sector and UPS, irrespective of how other companies shift strategies.”
The threat of Amazon building is own delivery service has percolated since at least 2014, after a troublesome 2013 holiday delivery season plagued by delays of UPS and FedEx shipments due to an overload of packages.
Back then, UPS CEO David Abney said UPS developed its network over 100 years, “and it’s very difficult to replicate in a short period of time.”
Amazon realized FedEx, UPS and other shippers couldn’t accommodate the growth in the e-commerce giant’s booming business as it pushed into same-day delivery through Prime Now. For example, UPS ran into problems early in the 2017 holiday season due to an unexpected overload of packages in its system. In recent years, Amazon has built its own fleet of air cargo planes and a ground delivery system to pick up the slack.
The push into shipping is similar to what the company built with Amazon Web Services, its web hosting and cloud computing division, which was built off of the massive data centers the company built to host its retail apparatus, said Colin Sebastian, a senior research analyst who tracks Amazon for investment firm Baird.
“It’s a way of leveraging all the infrastructure they’ve built,” he said.
CFRA Research analyst Jim Corridore, who is keeping a “strong buy” rating on UPS and FedEx, said the launch of “Shipping with Amazon” will likely put pressure on prices.
“We think the current economic expansion and surging e-commerce volumes are able to support a new competitor,” Corridore wrote in a research note to investors. “At the same time, Amazon will find it costly and difficult to compete with the infrastructure” of FedEx and UPS.
Amazon has narrowed its list of potential communities for its massive second headquarters to a final grouping that includes Atlanta and 19 others in the U.S. and Canada. The potential to land the company has set off a battle royale for a project promising prestige and 50,000 high-paying jobs.
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