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The Wall Street Journal reports that Amazon is getting ready to launch a new delivery service that would position it as a competitor to FedEx and UPS.

The service will be called “Shipping With Amazon,” or SWA, and reportedly will undercut FedEx and UPS on price.

According to the story, “the new service will entail the online retail giant picking up packages from businesses and shipping them to consumers, according to people familiar with the matter … Amazon expects to roll out the delivery service in Los Angeles in coming weeks with third-party merchants that sell goods via its website, according to the people. Amazon then aims to expand the service to more cities as soon as this year, some of the people say.”

While SWA initially will deliver products sold by third-party merchants on its site, the goal is to eventually expand to delivering other goods sold by other companies.

The Journal writes: “It is the latest move by Amazon to create its own freight and parcel delivery network. In the last couple of years, Amazon has expanded into ocean freight, built a network of its own drivers who can now deliver inside homes and leased up to 40 aircraft while establishing an air cargo hub. Amazon already delivers some of its own orders in at least 37 U.S. cities.”

However, “Amazon will face steep hurdles to build out the needed infrastructure and personnel for a reliable delivery network of any broader scale, and it could take years for the company to make a meaningful dent on the industry.”
KC's View:
Experts in this business argue persuasively that this isn’t an easy nut to crack. and I’d tend to agree with that.

I think there are two things at work here.

One, Amazon has the money to invest in a delivery test from which it can learn a lot about economics, infrastructure, and the degree to which it should and can control the final step in the customer experience. If it works, and seems expandable and sustainable, Amazon can keep going. if it doesn’t, it would be completely within Amazon’s cultural norms to just stop, say it didn’t work, and move on. (Remember the Bezos quote - ‘It isn’t an experiment if you know how it is going to turn out.”)

Two, it is a shot across the bow of any delivery business that wants to raise its rates.

Win, win.