Amazon 'testing its own delivery service on West Coast'

Report Amazon Is Toying With A New Delivery Service That Could Replace UPS And FedEx

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 declined to comment. Amazon would pick up packages from third-party merchants selling on its platform and deliver the products to consumers.

"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.

"We are using the same carrier partners to offer this program that we've used for years, including UPS, USPS and FedEx", said Amazon spokeswoman Kelly Cheeseman in an email to CNNMoney about the Bloomberg report.

The disruption that Amazon might cause has been downplayed by UPS in the past.

Bloomberg Intelligence's Charles Allen added that Amazon has lower "drop density", or having many delivery points close together, than FedEx and UPS, which could be a disadvantage.

Whether this is bad news for UPS and FedEx remains to be seen. The new service gives Amazon control over those deliveries instead, even if it continues to use third-party couriers. The third is access to more warehouse space, which takes the pressure off Amazon's own storage locations and should allow them to operate more efficiently.

Don't miss: Amazon's aggressive warehouse and shipping strategy is paying off. But that system has been strained during the holiday shopping season. The company issued refunds to many shoppers and may have signaled that it is too dependent on shipping partners during its busiest times. It did not indicate how the deliveries would be handled and by what type of service.

CEO David Abney at UPS said during a December 2016 interview that the company did not believe Amazon's strategy was to do the delivery and it believes that because of the massive infrastructure UPS has in place and the investment it is making in technology giving them a strong mutual relationship with the online e-commerce giant.

FedEx shares were up 0.9% at $220.27. That's why the fashion industry is just one among many on edge as it awaits Amazon's next move, especially since the e-commerce giant has made no secret of its apparel aspirations.

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