Amazon Preparing To Launch Delivery Service For Businesses

Analyzing Stocks On Analyst Opinion: Dollar General Corporation (DG), FedEx Corporation (FDX)

Royal Bank Of Scotland Group Plc bought 146,650 shares as the company's stock rose 8.67% with the market.

"There is tremendous opportunity" in the business-to-consumer market, according to UPS, "and more growth coming to the sector and UPS, irrespective of how other companies shift strategies". Amazon is planning to undercut UPS and FedEx on pricing with the service, although the exact rate structure is still unclear. He pointed out, however, that UPS reported 8 percent revenue growth and a 4.5 percent increase in package volume in the United States past year.

Executives at UPS and FedEx have downplayed the Amazon threat before, saying that it would take a massive investment over a long time to build an air and ground network to rival theirs. During the same period a year ago, the firm posted $3.30 earnings per share. Amazon already delivers, its own orders in 37 US cities, but still relies on the likes of the US Postal Service to fill in the gaps in its coverage.

An Amazon entry would "send shivers down the spines of the traditional delivery companies", said Neil Saunders, managing director of GlobalData Retail.

Regardless of Amazon's ambitions, it is widely agreed that it will not be an easy feat for Amazon to match the network reach of FedEx, and UPS.

On or hand, Amazon signed an agreement last week with Berkshire Hathaway and PM Morgan to create a health services company that aims to reduce costs of healthcare and improve services offered to its employees in U.S. Several took a wait-and-see approach to the Amazon threat. Although Amazon has been beefing up its delivery capabilities in recent years, with cargo planes, trucks and same-day delivery drivers, he said its operations are still much smaller than those of the nation's largest delivery companies.

Citi analyst Christian Weatherbee said Amazon hasn't yet committed significant assets to a new delivery program.

Steve Gaut, a spokesman for UPS, declined to comment about Amazon's plans or whether the company's shipping volume with UPS had changed.

Amazon is likely to remain a major customer for UPS and FedEx for quite some time, complicating their relationship.

In recent years, Amazon introduced Seller Fulfilled Prime, which lets merchants who don't stow items in Amazon warehouses still have their products listed with the Prime badge, meaning they'll be delivered within two days. Stifel analyst David Ross said Amazon will grow its logistics business but won't be able - and may not even want - to handle all of its own deliveries.

FedEx released a statement in response, which read, "The headline in today's Wall Street Journal demonstrates a lack of basic understanding of the full scale of the global transportation industry".

The debate around competing with or aligning with Amazon continues to rage on for retailers, and the introduction of this service certainly would add more fuel to the fire. According to the WSJ, Amazon has been testing the service from warehouses next to Los Angeles International Airport.

This week Amazon launched two-hour grocery delivery for Prime members from Whole Foods, which it bought last summer for almost $14 billion. BlackRock Inc. now owns 14,823,307 shares of the shipping service provider's stock valued at $2,892,768,000 after purchasing an additional 14,086,601 shares during the last quarter.

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