Yet increasingly the e-commerce giant is relying on its own methods to deliver products to its customers. It launched its Amazon Air plane delivery service in 2016 and then its Seller Flex service in late 2017. The USPS has said that thanks to these in-house deliveries, it expects its share of Amazon's package deliveries to drop to 45% by 2023. It reached a peak of 65% in 2015, and the growth rate of its Parcel Select program is steadily declining.
Amazon may even actively be trying to poach customers from FedEx and UPS by offering lower prices to consumers. Fees represent 30% of the total shipping cost, and Amazon has expressed a willingness to forgo them. Amazon has a larger scale and lower costs than its competition, and will therefore be able to effectively undercut the other two deliver services even if its own service is loss-making proposition for the time being.
"There's another investment cycle coming, and I bet you it's around shipping and them actually coming out and directly competing with FedEx and UPS," predicted RBC Capital Markets' Mark Mahaney. "I think it's just a matter of time before that happens and it will be an investment cycle in front of that."
"Knowing Amazon, I wouldn't be at all surprised to see them be willing to take down margins that they thought could really get a boost in terms of customer loyalty, more Prime customers, etc.," Mahaney continued.
The e-tail giant will begin a new program called "Shipping with Amazon," an end-to-end shipping solution from business to consumer. The company said it wants to help "support the small and medium businesses who sell on Amazon, including testing shipping programs," indicating that Amazon isn't going after the bigger clients yet and first trying to gain control of smaller, niche segments where its competitors don't have as much purchase.
It's unclear if FedEx and UPS are prepared for the onslaught. "We don't see Amazon as a peer competitor at this point in time," FedEx CEO Fred Smith said last month. Shares of FedEx and UPS were both down over 1% at the news that Amazon would lower costs.
Meanwhile, Amazon has built up its partnership with Air Transport Services Group