Amazon is experimenting with a new delivery service to make more products readily available for free two-day delivery, according to a Bloomberg report.
The service reportedly began in India two years ago and Amazon has been marketing it to US slowly. This service is intended to relieve overcrowding in Amazon’s warehouses and push the ecommerce major deeper into the logistics space, currently dominated globally by players such as FedEx and United Parcel Service.
The pilot project, which is being called Seller Flex, in the US is preparing for a national expansion after it started in West Coast states. The broader rollout plans are set for 2018.
Amazon will oversee the pickup of packages from warehouses of third-party merchants who sell on Amazon.com and will also manage delivery to the end customer. This work is currently handled by UPS or FedEx but Amazon will now get to decide how delivery takes place.
Bloomberg reports that handling more deliveries itself would give Amazon greater flexibility and control over the last mile to shoppers’ doorsteps. Additionally, Amazon will be able to save money through volume discounts and sellers will keep the goods in their own facilities, which will reduce congestion for Amazon in its own warehouses.
This can be seen as Amazon’s move to reduce its dependencies on delivery services such as UPS and FedEx for its deliveries, hence making its delivery quicker and more reliable.
Seller Flex will also give Amazon more visibility into the warehousing and delivery operations of its merchant partners. This could help the ecommerce giant in making full use of its product inventory, storage space and proximity to customers and hence improve delivery speed.
However, this move could have an impact on the business of UPS and FedEx. Apart from an increased competition, they also stand to lose out on business. As per the Bloomberg report, analysts estimate that Amazon accounts for 5-10% of UPS revenue, while FedEx has said the e-commerce giant accounts for less than 3% of its sales.