Amazon Test Drives Delivery Services

Amazon Truck

SEATTLE – It looks like anyone who ships products will have three more letters to learn: SWA, or Shipping with Amazon. 

The online giant’s announcement last week that it’s launching a package-delivery service has UPS and FedEx sweating and analysts speculating.

The Wall Street Journal reports SWA will roll out in Los Angeles during the next few weeks and then spread to other cities in the U.S. throughout the year.

Amazon is expecting to send SWA drivers directly to retailers and warehouses to pick up parcels, which they would deliver directly to consumers in the 37 cities – cutting out UPS, FedEx, and other delivery services. The plan is to start with registered third-party Amazon vendors and undercut the costs of other delivery companies.

The move doesn’t surprise insiders. Amazon has been leasing aircraft and buying ocean freight equipment. And it’s been getting comfortable in the grocery-delivery business, too. 

In fact, last week, Amazon and Whole Foods Market also introduced free two-hour delivery to Prime customers in Austin, Cincinnati, Dallas, and Virginia Beach, Va., with plans to expand across the U.S. in 2018. 

Forbes contributor Phil Lempert says about 90 percent of the 90-plus million Amazon Prime shoppers are estimated to live within 10 miles of a Whole Foods store. “So it was a no-brainer that the company would use the stores to build a more efficient food delivery platform to serve their current members – and no doubt along the way pick up new Amazon Prime members,” Lempert says.

Meanwhile, Neil Saunders, managing director of GlobalData Retail, a retail analysis firm, says the expansion into package delivery with SWA is sending “shivers down the spines of the traditional delivery companies,” and that he sees SWA as “an intention to control the process of shopping end-to-end.” 

He adds the danger for traditional delivery firms is twofold. “First, they are likely to lose business from Amazon; this will be slow at first but will accelerate as Amazon rolls out more of its own delivery services,” Saunders notes. “Second, if Amazon starts offering delivery to businesses, it will likely do this at a reduced rate. This leaves delivery firms with the unattractive prospect of losing share in their most lucrative and profitable markets, while at the same time having to offer a national service with all the expense of delivering to rural locations.”