Amazon is making a play that could upend UPS and FedEx in the market for product delivery, according to recent reports.
The company is laying the foundation for its own shipping operations in a move that would assuredly send shock waves through the United Parcel Service (UPS) and FedEx Corp., the Wall Street Journal reports. Both shipping services are major partners of Amazon.
UPS holds the largest share of the market for product delivery services with over 19 percent, and FedEx holds just over 14 percent, according to data.
Amazon publicly said they are not looking to completely edge out the two shipping conglomerates, but rather seeking to heavily supplement shipping.
Supplementing, or edging out these two giants, will be a costly endeavor for Amazon. FedEx spent $4.3 billion in capital expenditures alone in the last fiscal year. The company reports spending $5 billion annually on improvements and expansion into new markets, the Journal reports.
UPS is expected to spend in the ballpark of $2.8 billion in capital expenditures in 2016.
Capital expenditures are funds used to acquire or upgrade physical assets like property, plant, and equipment. Typically, companies expend liquidity to improve their physical property and invest in the future.
FedEx and UPS combined operate over 1,000 planes and 200,000 vehicles. Needless to say, Amazon is facing some steep competition in the market for direct product delivery.
The company is sticking with its assertion that the new efforts to deliver products via drones and personal vehicles is merely to supplement services provided by UPS and FedEx.
Kelly Cheeseman, a spokesperson for Amazon, told the Daily Caller News Foundation: “We are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.”
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