RAMON ALVARADO

Amazon is getting ready to compete directly with FedEx and UPS. The world’s largest internet company already ships their own packages to some capacity, but the new “Shipping with Amazon” (or SWA) program take things a step further. Amazon will be picking up packages directly from businesses and then delivering them to buyers.

The shipping program has already launched in London, and the Wall Street Journal reports it will hit Los Angeles “in coming weeks.” Amazon is looking to expand the system to other major U.S. cities later in the year.

News of Amazon’s service had an impact on competitors right away. FedEx’s stock was down about 4% and UPS’s 3.9% in early afternoon trading Friday.

“Shipping with Amazon” has been in the works for years. The corporate giant has invested billions in warehouses, cargo jets and vehicles to try to cut out the middle man, so to speak.

“Shipping costs, which include sortation and delivery center and transportation costs, were $11.5 billion, $16.2 billion, and $21.7 billion in 2015, 2016, and 2017,” Amazon’s annual 10-K report for 2017 stated.

Last year’s $21.7 billion shipping cost hit is likely the primary reason Amazon has launched its “Shipping with Amazon” service.

“Amazon Prime Air” is another delivery program Jeff Bezos is cooking up to cut costs for his company. Amazon’s website says the delivery system is “designed to safely get packages to customers in 30 minutes or less using unmanned aerial vehicles, also called drones. Prime Air has great potential to enhance the services… by providing rapid parcel delivery that will also increase the overall safety and efficiency of the transportation system.”

While Amazon’s new delivery systems may have a profound effect on long-time shipping staples FedEx and UPS in the future, neither of the latter companies should be too worried now.

To put Amazon’s race to catch UPS and FedEx’s shipping services in perspective, Amazon only owns 40 cargo planes while UPS has an active fleet of 242 and FedEx has an active fleet of around 650.

Amazon will still have to rely on FedEx and UPS before they get their “Shipping with Amazon” and “Amazon Prime Air” programs fully in motion.