FedEx, UPS shares sink as Amazon reportedly tests delivery service

FedEx and UPS shares declined in early trading on Thursday amid a report that ecommerce giant Amazon is testing its own delivery service.

Amazon has already launched a test run of its delivery service, purportedly dubbed “Seller Flex” in West Coast states ahead of a projected larger rollout in 2018, Bloomberg reported. Shares of both delivery services declined more than 2% in premarket trading before rallying slightly below previous-day levels. Amazon declined to comment on the report and has yet to address the situation.

The ecommerce giant is aiming to use the service to make more products from third-party vendors available for free two-day shipping and to help clear inventory at its own warehouses – roles that FedEx and UPS have traditionally occupied. Rather than relying on the delivery services, Amazon will pick up products from vendors and deliver them to customers.

While FedEx and UPS are expected to retain some functions of their partnership with Amazon, such as final delivery, the digital retailer will “decide how a package is sent instead of leaving it up to the seller,” Bloomberg reported.

FedEx CEO Fred Smith downplayed concerns about Amazon’s potential entrance into delivery during a conference call with analysts last March.

"So Amazon's a wonderful company and they certainly have revolutionized the e-commerce world, and we're not sure what Amazon's going to do one way or another,” Smith said. “But the FedEx system that consists of thousands of facilities and the ability to pick up, transport, and deliver in one to two business days between any two addresses in the United States has been decades in the making. And we think that we have not a great risk of being disrupted, to use the term."

FedEx and UPS have yet to comment.