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Amazon Moves Closer to Competing With UPS, FedEx

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Pretty soon, instead of asking what brown can do for them, customers could be asking what Amazon can do.

The e-tail giant has gotten so big it may have outgrown employing aid from carriers like the United Parcel Service and FedEx to deliver its e-commerce packages—Amazon, it seems, can do it all by itself, though it isn’t officially saying so yet.

Amazon’s goal, unnamed sources told The Wall Street Journal, is ultimately to deliver packages for itself and for retailers and consumers, just like a UPS or FedEx would.

Publically, however, Amazon claims it’s simply adding capacity, not trying to go head to head with the major carriers (as though buying its own big trucks, chasing rights for drone delivery, enlisting Uber-like drivers and painting its own planes with “Prime Air” weren’t evidence of a fledgling logistics fleet).

In an emailed statement, Amazon told the Journal, “We are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.”

But if Amazon is going to do this, it’s going to do it the same way it’s done everything else: quietly. Sources told the Journal Amazon is more or less building a full-service logistics and transportation network from the ground up.

Leaders at the major shippers are either skeptical or naïve about the threat Amazon could pose in this arena, noting that it would be both challenging and costly for the company to build up the kinds of logistical networks they boast.

“The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic,” FedEx CFO Alan Graf told the Journal. “We’ve been at this for 40 years.”

So far, though, there’s been little Amazon has been unable to do, despite others doubting it.

In the last couple of years alone, Amazon has added roughly 70 warehouses and fulfillment facilities in 21 states, and now they can say 44 percent (compared to 7 percent in 2012) of people in the U.S. live within 20 miles of one of those facilities, according to a Piper Jaffray analyst.

For the first half of this year at least, Amazon’s fulfillment costs grew 34 percent, faster than its 30 percent total revenue growth in the same period, the analyst noted.

If Amazon were to do its own delivering though, analysts at Citigroup told the Journal it could save $1.1 billion each year just from not using UPS or FedEx, as controlling its own packages could save the company roughly $3 on a typical delivery, which, on average, costs around $7.81.

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