Amazon challenges UPS and FedEx with a new delivery service, causing their stocks to drop.

Amazon Launches Business Delivery Services, Impacting Logistics Stocks

Amazon has revealed plans to start offering delivery services to businesses, regardless of whether they sell on its e-commerce platform. This surprising move has caused stock prices for FedEx and UPS to drop sharply.

The new program, named Amazon Supply Chain Services, has shaken up the logistics sector, with FedEx and UPS stocks falling by 10%. Other transportation entities like GXO Logistics dropped 13%, while XPO and Old Dominion Freight Line saw declines of around 6%.

Some of the early adopters of Amazon’s expansive delivery network include Procter & Gamble, 3M, Land’s End, and American Eagle Outfitters, which utilize various modes of transport such as planes, trucks, and vans.

Dan Ives, a technology analyst at Wedbush, characterized this new service as a significant move, suggesting it directly competes with FedEx and UPS. He expressed confidence that Amazon would be successful in this venture.

Amazon has stated that it’s already providing these logistics services to “hundreds of thousands of sellers” on its platform, making use of existing capacity within its network.

Peter Larsen, the vice president of Amazon Supply Chain Services, noted that the company offers a robust supply chain infrastructure akin to what Amazon Web Services provided for cloud computing.

Among the five identified customers of ASCS, 3M uses it to move products from manufacturing to distribution centers, while American Eagle employs the service to ship online orders directly to customers.

According to Morgan Stanley analyst Ravi Shankar, ASCS could mark a significant change for North American freight forwarders. He mentioned that air freight and parcel carriers might face the most significant challenges, although other sectors, including trucking and rail, could also be affected, as reported by Bloomberg.

This launch coincides with discussions in New York City where the City Council is contemplating legislation that would require Amazon to employ delivery drivers currently working for third-party firms.