How Amazon Could Become the World’s Largest Shipping Company

Tech giant Amazon.com, Inc. (NASDAQ:AMZN) has spent years building the technological infrastructure it needs to ship its own goods, but at the drop of a hat, it could decide to offer its delivery services to other companies as well.

As Bloomberg detailed today, this would spell disaster for current shipping giants like FedEx and UPS.

[Some] believe that Amazon will make a business out of its delivery network, as it did with Amazon Web Services, thereby challenging the world’s leading shipping companies. “I fully expect Amazon to build out a logistics supply chain that others can use,” says John Rossman, a former Amazon executive who’s now a managing director at the restructuring firm Alvarez & Marsal. “Over the next five years? I doubt it. Over 10 or 15 years? Oh yeah.”

For what it’s worth, CEO Jeff Bezos spoke about the company’s shipping ambitions recently, and stopped well short of saying it would compete with couriers:

“We will take all the capacity that the U.S. Postal Service can give us and that UPS can give us and we still need to supplement it. So we’re not cutting back. We’re growing our business with UPS. We’re growing our business with the U.S. Postal Service.”

And thus far, delivery giants don’t seem all that concerned either:

UPS and FedEx have shrugged off Amazon’s threat to their business, in public anyway. On a conference call in February, UPS CEO David Abney was diplomatic: “Amazon’s a good customer of ours. We have a mutually beneficial relationship.” In an investor call the following month, FedEx CEO Fred Smith scoffed at the notion that Amazon might challenge his company, calling it “fantastical.”

Amazon usually plans its moves several years in advance, however, so we’d be naive not to expect the company to offer delivery services at some point. Not today, or tomorrow, but some day in the not too distant future, Amazon may become a big threat to traditional shipping companies — just like it will probably soon disrupt the auto space.

For now, the company continues to boost its logistics and delivery systems. It launched Prime Air this month, which will include 40 leased cargo planes with Amazon branding on them. Branded delivery vans are reportedly on the way as well, as the company expands to doing its own “last mile” services.

With growth being the imperative it is with Amazon, expect the company to leverage its delivery chain in any way possible.

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Amazon shares fell $2.86 (-0.37%) to $764.72 in Wednesday morning trading. AMZN has gained about 13% year-to-date, nearly doubling the S&P 500’s performance in the same period.

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