Amazon to test its own Delivery Service

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For the time being at least Amazon will still use FedEx and UPS and other couriers for delivery services, but the company will now decide a how a package is handled instead of leaving the decision up to the seller, the Bloomberg report added.

The goal of Amazon's delivery service is to help expand the items available for its free two-day shipping and reduce overcrowding in company warehouses.

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

The two sources with company told Bloomberg the project began on the West Coast as a trial and a broader rollout being planned for 2018.

Amazon reportedly began experimenting with the idea two years ago in India and has been slowly pitching the concept to USA merchants.

Currently, third-party sellers on Amazon - people who use Amazon's website to sell, but don't store products in an Amazon warehouse - handle their shipping themselves, using Amazon's tools with UPS and FedEx to ship products.

"Amazon's final-mile efforts reflect a logical extension of its model as it builds network density", Benjamin Hartford, a Robert W. Baird analyst, said in a note. When it comes to logistics, the science of getting stuff from point A to point B in the fastest, most efficient way possible, Amazon has changed how we ship in ways only a package company can really appreciate.

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. This third-party delivery service is called Amazon Seller Flex.

When asked whether UPS and FedEx investors should be concerned about Amazon entering the market, Cramer said "yes". News of Amazon planning its own delivery service is likely the cause of this drop. The company is not commenting on the report. While its revenue exposure to Amazon isn't detailed, the company said "no single customer accounts for 10% or more of our consolidated revenue".

It's important to remember that Amazon is not the only e-commerce game in town.

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. Now, Amazon will be able to deliver the third-party's products through its own service.

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