Amazon wants to make more products available for two-day delivery, so it's launching a FedEx competitor

Bad news for FedEx and UPS—Amazon is coming to eat their lunch.

Amazon is testing a new delivery service with the intention of making more products available for free two-day delivery, according to a Bloomberg report. The service would also help take pressure off of overcrowding issues at its warehouses.


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The plan would put Amazon in direct competition with its longtime partners UPS and FedEx, which currently manage most of the two-day deliveries made by Amazon Prime members. Following the revelation this morning, UPS shares were down 2.3 percent and FedEx shares were down 2 percent in premarket trading.

The delivery service would give Amazon critical control over the final stages of order sorting and delivery. Amazon would reportedly pickup packages from warehouses of third-party merchants, then deliver them to people's homes. This is currently a process performed by UPS and FedEx. 

The service has been in the works for a long time. Amazon has been testing a pilot program for the delivery service in India for two years, according to Bloomberg, and the online retailer is already marketing the delivery service to US merchants under the name "Seller Flex" ahead of its planned national expansion. 

The new Amazon delivery service is already available in some West Coast areas, and the company reportedly has a broader rollout planned in 2018. 

The move makes a lot of sense when you stop to think about it: Amazon would ultimately handle more of the deliveries and control one of the most important processes in an Amazon Prime purchase: the last mile of delivery to customer's homes. It would also make it easier for the online retailer to discount large orders and avoid warehouse congestion by being able to store goods in a different facility.

The move would also make its already-popular two-day delivery feature even more powerful, adding a variety of products that consumers buy. It's a win across the board.

The company has been moving in the direction for a while now. Amazon introduced Seller Fulfilled Prime last year, which allows merchants who don't store products in Amazon warehouses to still have products listed for two-day delivery. The merchants were required to meet certain delivery requirements set by Amazon, and most of them have been using UPS and FedEx to meet those goals. The new service would give Amazon control over these deliveries.

The news really shouldn't surprise anyone. Amazon has long been working to shorten delivery times and reduce costs of deliveries. The company built sortation centers around the country to optimize deliveries, but has still relied on the US Postal Service and others for the final mile of delivery. Now, it appears that Amazon could finally control this critical last leg of the delivery process.

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7 shock-worthy facts about Amazon
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7 shock-worthy facts about Amazon
7.5 percent of Seattle's working-age population are Amazon employees

Amazon has more than 300,000 employees worldwide, and 40,000 in Seattle alone.

As a portion of the city's working-age population — roughly 528,000 — that comes out to 7.5% of the city working at Amazon.

For perspective, if the same portion of New York City's adults worked for one company, that company would have about 488,000 locals on staff.

Amazon accounts for 43% of all online sales

Amazon used to be a way to buy books online; today, it's the default buying site for just about everything, especially for people who have Amazon Prime.

An analysis by Slice Intelligence released in February found that 43% of all US online retail sales were done through Amazon in 2016.

That's up from 33% in 2015 and 25% in 2012.

1 out of every 4 US adults has Amazon Prime.

Speaking of Amazon Prime, the company now counts approximately 63 million people among its subscriber base, or about 25% of the total US adult population.

That number may underestimate the true coverage, however, since it doesn't account for multiple adults in one household all sharing the same Prime account.

Amazon ships 1.6 million packages a day

Amazon fulfillment is a beast of its own.

A report from 2013 (the latest year for which data are available) found Amazon shipped 608 million packages that year, or 1.6 million packages a day.

As of 2015, Amazon estimated its fulfillment centers were within 20 miles of 31% of the US population, and within 20 miles of 50-65% of its core, same-day-accessible market.

That's enough cardboard to span all of West Virginia

A back-of-the-envelope calculation reveals all those packages (not including padded envelopes) yield roughly 26,400 square miles of cardboard.

The total land area of West Virginia, meanwhile, is just north of 24,000 square miles.

Given the speed of Amazon's shipments, the company could blanket the whole US in cardboard in about five months.

45,000 robots roam the floors of Amazon's warehouses

To help those shipments leave the warehouses on time, Amazon relies on a growing fleet of autonomous robots that fetch packages from their shelves and bring them to human employees.

The 45,000 robots live across 20 fulfillment centers in the US. In 2016, the company increased the fleet 50% from its prior head count of 30,000.

Amazon is more valuable than all major brick-and-mortar retailers combined

The sum total of those investments in infrastructure and supply chain management have made Amazon by far the most valuable retailer in the United States.

Amazon's $356 billion valuation is so big, it's larger than Wal-Mart, Target, Best Buy, Macy's, Kohl's, JCPenney, and Sears combined.

With the recent acquisition of Whole Foods, there are no signs the retailer has any plans of slowing down.



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