Amazon Steps Into Delivery with Seller Flex, Acquires 3-D Model Business

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Shares of United Parcel Service Inc and FedEx Corp fell on Thursday after a report that Inc was testing its own delivery service, potentially encroaching on the territory of the package delivery companies.

Amazon is exploring the concept of a new delivery system dubbed "project Seller Flex", in which the e-commerce giant will assume a bigger role in functions provided by FedEx and UPS, two people familiar with the plan told Bloomberg.

The goal of the program Amazon is reportedly experimenting with, which Bloomberg reports began in India two years ago and is being tested in western USA states, is to expand the breadth of items available under Amazon Prime.

Amazon, which effectively confirmed the program, said its current delivery partners also includes the U.S. Postal Service (USPS).

Word of Amazon making a move into home delivery of third-party goods sent UPS shares down 1.3 percent in early Thursday trading. Sellers who are approved must purchase shipping for all Prime items through Amazon's Buy Shipping Services.

FedEx shares were down less than 1 percent.

FedEx CEO Fred Smith downplayed concerns about Amazon's potential entrance into delivery during a conference call with analysts last March. Secondly, one doubts FedEx and UPS are going to welcome a competitor with open arms and smiles, especially since this means they're losing business.

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.

Don't miss: Amazon partners with Atlas Air Worldwide for cargo services. "If Amazon does take a few customers, the whole e-commerce pie is growing so fast that FedEx and UPS won't miss a beat". So what'll happen once they start shipping packages themselves?

In 2016, Amazon introduced the Seller Fulfilled Prime program, which allowed third-party sellers to sell with the Prime two-day shipping guarantee if they could prove that that time frame was feasible even if the items didn't ship from Amazon's warehouses. Online holiday spending in the US will hit $129 billion this year, up 12 percent from a year ago, according to Forrester Research Inc.

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