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Good News For UPS And FedEx: Amazon Halts Shipping Program As Coronavirus Drives Online Demand - Forbes

Good News For UPS And FedEx: Amazon Halts Shipping Program As Coronavirus Drives Online Demand - Forbes

Good News For UPS And FedEx: Amazon Halts Shipping Program As Coronavirus Drives Online Demand - Forbes

Amazon Shipping Coronavirus

As coronavirus pandemic drives high online demand, Amazon says it's halting its two-year-old Amazon ... [+] Shipping in the U.S. that helps its third-party merchants deliver goods from their own warehouses. (Photo by Paul Hennessy/NurPhoto via Getty Images)

NurPhoto via Getty Images

As the coronavirus pandemic drives up online orders of groceries and other household essentials, e-commerce giant Amazon is taking a break from its two-year-old Amazon Shipping pilot program in the U.S.—in a move seen as potentially benefiting package giants UPS and FedEx.

Amazon said it’ll pause the test of Amazon Shipping in June after first starting the program in 2018 in Los Angeles to offer its shipping service to third-party merchants that sell on its site but that had been handling delivery themselves from their own warehouses instead of through Amazon fulfillment centers. The program had since been expanded to a “handful of cities,” according to Amazon, including New York and Chicago.

The Wall Street Journal first reported the company’s plan to suspend the pilot. 

Amazon declined to break down the size and scope of the pilot test or the number of third-party merchants that use Amazon Shipping, or to specify when and if it might restart the program. But the move is surely being applauded by UPS and FedEx FDX investors, who have been concerned that the growing Amazon Logistics will steal more delivery share from the traditional package carriers. UPS shares gained 6% Wednesday while FedEx jumped 8%. 

Third-party seller services is a key growth driver for Amazon, with sales there up 30% in the fourth quarter, double the growth rate Amazon generated from its own online store sales. Third-party sellers represented 53% of the number of units sold through Amazon globally, according to the company’s most recent Q4 earnings report.

Amazon’s expanding logistics clout has been seen as a threat that could potentially deliver a big upset in the $900 billion U.S. logistics sector. Amazon had delivered nearly half of U.S. packages bought on its e-commerce platform as of August through Amazon Logistics, the internal delivery arm it started in late 2014, more than double the 20% figure from just a year earlier, investment bank Morgan Stanley MS said in a December report following a nine-year study. 

With most Americans ordered to stay at home to flatten the country’s coronavirus curve and many consumers reluctant or unable to go out, opting to shop online, U.S. delivery demand has shot up across the board, causing delays even at Amazon, a company known for its two-day, and increasingly one-day, Prime shipping pitch. 

Amazon has been prioritizing household staples, medical supplies and other high-demand items to be sent to its fulfillment centers. It has also said it’s adding 100,000 jobs to meet increased customer demand. The company has said it’s providing masks for its hourly employees and is implementing temperature checks, in a move that has been adopted by rivals including Walmart.

Related on Forbes: Walmart, Home Depot implement safety measures amid coronavirus pandemic; more companies should follow suit

Related on Forbes: Companies pivot to make masks and sanitizers as coronavirus highlights the importance of stakeholders over shareholders

Related on Forbes: Coronavirus may be hurting business around the world, but it’s driving shoppers to Costco

Related on Forbes: Food and grocery deliveries spike amid coronavirus crisis


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