Amazon Opens Logistics Network to All Businesses, Sending UPS and FedEx Stocks Tumbling

TLDR

• UPS and FedEx shares each fell roughly 10% on Monday after Amazon announced it would open its supply chain to outside businesses
• Amazon’s new “Amazon Supply Chain Services” lets any company use its logistics network to move and deliver products
• Amazon has already surpassed UPS and FedEx as the largest parcel carrier in the U.S. by volume
• Major retailers including Procter & Gamble, 3M, Lands’ End, and American Eagle Outfitters have already signed up
• Amazon shares ticked up about 1.4% on the news

Amazon announced on Monday that it is opening its global logistics network to businesses outside its own platform. The move sent shares of UPS and FedEx tumbling roughly 10% each — their steepest single-day drops in over a year.

United Parcel Service, Inc., UPS

Both UPS and FedEx are among the five worst performers in the S&P 500 on the day, according to Dow Jones Market Data. Neither company responded to requests for comment.

Amazon shares were largely unchanged, closing up about 1.4%.

The new service is called “Amazon Supply Chain Services.” It allows companies across multiple industries to use Amazon’s infrastructure to move and deliver products and raw materials.

Amazon has built one of the largest logistics operations in the world over the past decade. The company now operates a fleet of more than 100 cargo planes and a vast network of warehouses across the globe.

It already passed UPS and FedEx as the biggest parcel carrier in the United States by volume. This new service now targets the broader global market for third-party logistics.

Amazon described the offering as a way for businesses to tap into the same supply chain it built for itself. The company is betting it can turn that infrastructure into a revenue-generating service, similar to how it built Amazon Web Services from its own internal technology.

Several major retailers have already signed on. Procter & Gamble, 3M, Lands’ End, and American Eagle Outfitters are among the first companies using the new program.

UPS and FedEx Face a New Rival

UPS stock closed at $96.31, down over 10% on the day. FedEx closed at $357.80, a drop of more than 9%.

Both companies have faced pressure in recent years as Amazon expanded its own delivery operations. Monday’s announcement marks a more direct challenge, as Amazon now actively competes for the same business customers that UPS and FedEx rely on.

The logistics market for third-party services is large and global. Amazon’s entry into this space gives businesses an alternative to the two dominant players.

A Bet on Logistics as a Business

Amazon’s supply chain expansion follows the same playbook it used with cloud computing. It built the infrastructure for its own needs, then opened it up to paying customers.

Amazon Web Services is now one of the most profitable divisions in the company. Amazon appears to be aiming for a similar outcome with logistics.

The Wall Street Journal first reported the story on Monday morning. Amazon has not announced pricing details for the new service publicly.

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