Amazon launching private delivery service to compete with UPS and FedEx: report

But given how Amazon treats workers, it seems unlikely it will deliver superior service to much-hated FedEx or UPS

By Nicole Karlis

Published February 9, 2018 6:26PM (EST)

 (AP/Mark Lennihan)
(AP/Mark Lennihan)

Amazon has cast its eye on another industrial frontier: package delivery services.  The tech conglomerate is reportedly gearing up to launch a new delivery service called “Shipping with Amazon” — or SWA — that will compete with  United Parcel Service Inc. and FedEx Corp, the Wall Street Journal reports.

According to the report, the delivery service will pick up packages from businesses that sell goods on Amazon and will ship and deliver them to consumers; it expands on a pilot project that launched in 2016 in Los Angeles. The new service is expected to launch in the coming weeks in Los Angeles with third-party merchants, and plans to open its services eventually to other businesses, too.

The report states:

“With the new “Shipping with Amazon” option, Amazon plans to send its drivers to pick up shipments from warehouses and businesses itself and deliver the packages when it is able, the people said. For shipments outside Amazon’s delivery reach, the U.S. Postal Service and other carriers will take care of the so-called last mile to customers’ doorsteps.

Amazon is allegedly planning to underprice UPS and FedEx; the rate structure remains unclear, though. When contacted by Salon, an Amazon spokesperson said: “We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices.”

This comes on the heels of the news that Amazon wants to get its private paws in the healthcare industry. Recently, reports surfaced of an initiative in which Amazon would partner with JPMorgan Chase & Co. and Berkshire Hathaway Inc. to form a new healthcare company for their employees. This isn't its only recent vertical integration for the company: Last summer, it announced it was acquiring Whole Foods, an acquisition likely intended to help grow its grocery selection. Amazon already has its own variation of a Hollywood studio with Amazon Studios, and a cloud-computing service. Together, the company is starting to look an awful lot like the world-dominating "Buy N Large" corporation from the dystopian Pixar movie "Wall-E."  Mistrust of Amazon may have been what caused Twitter to explode in speculation following the news of a delivery service.

Some think it could be "one of the largest market disruptions we've seen in years":

Others speculate it could become the world’s largest private carrier.

Another Twitter user described it as a “charter school” equivalent to postal delivery. (Notably, the report on SWA implies it would still be reliant on the government-run United States Postal Service for "last mile" deliveries.)

While some consumers might be enamored by this initiative, given Amazon's treatment of its warehouse and service workers it is fair to wonder the types of conditions that Shipping with Amazon workers will have to endure, and to what degree it will rely on contractors and non-union labor.

Historically, Amazon has beat the we’re-creating-jobs-drum in moves like this, especially when the jobs are operational and targeted toward lower and middle-class communities. However, as the Economic Policy Institute (EPI) noted in a recently-published report, counties that have Amazon fulfillment centers don't observe a boost in the local economy as promised. It’s also been widely reported that some Amazon warehouse employees haven’t always worked under the best conditions.

According to data on Glassdoor, a UPS package handler has an average annual salary of $27,249—with an additional cash compensation of $10,000. A UPS driver can make an average of $65,540 a year. According to various job postings seeking Amazon drivers, while it’s unclear if they’re specifically related to this new initiative, they’re being advertised as hourly wages between $13 and $15, which at full-time would equate to an annual salary of $27,040–$31,200 before taxes.

Though SWA's operational structure is unclear, one thing appears to be certain: starting anew in the shipping industry is a truly massive industrial and logistical undertaking — as FedEx CFO Alan Graf described to the Wall Street Journal in 2016.

“The level of global investment in facilities, sorting, aircraft, vehicles, people to replicate the service we provide, or our primary competitor provides, is just daunting, and frankly, in our view, unrealistic,” Graf said. “We’ve been at this for 40 years.”

Nicole Karlis

Nicole Karlis is a senior writer at Salon. Tweet her @nicolekarlis.

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