Amazon Reportedly Testing Local Delivery from Merchant DCs

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Amazon would pick up packages from third-party merchants selling on its platform and deliver the products to consumers.

Amazon has invested heavily in its logistics network over the years and taken on losses to build it out.

Amazon's new program could give carriers like United Parcel Service and FedEx a run for their money. While that might be alarmist, it's fair to ask, what will Amazon disrupt next? "We support all our customers with industry-leading e-commerce solutions and expect to expand these relationships further in the future", the statement said. Amazon declined to comment on the report and has yet to address the situation. Amazon has already been experimenting more with drone deliveries in order to have more control over the shipping experience for customers and also cut costs.

"Amazon is a valued customer", UPS said in statement sent to MarketWatch. That centralized approach can create logjams, particularly during the busy holiday shopping season.

The new experiment is meant to make more products available for free-two day shipping and relieve overcrowding in its warehouses, Bloomberg reported.

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And while FedEx suggested risks of Amazon's in-house capabilities in its 2016 10-K, FedEx explained they are well-positioned and said any negative reaction misunderstands the scale and complexity of its business.

Amazon will now have full control of its eCommerce business if the company does launch its own delivery service.

Morningstar analyst Keith Schoonmaker downplayed Amazon's potential threat, saying the retailer constitutes a mid-single-digit proportion of earnings at UPS and low-single-digit at FedEx.

FedEx shares FDX, -0.26% slipped 0.3%, after being down as much as 1.6% earlier, and were also on course for a third-straight loss from Monday's record high. The internet e-commerce giant is up 29 percent year to date through Wednesday versus UPS' 4 percent and FedEx's 19 percent returns. So what'll happen once they start shipping packages themselves?

Prime Now offers a limited assortment of products, such as phone chargers and bottled water, in as little as an hour to shoppers in many cities. What if Amazon used excess capacity in the warehouse of their merchants to store its own goods or those of other merchants? Online holiday spending in the US will hit $129 billion this year, up 12 percent from a year ago, according to Forrester Research Inc.

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