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Amazon Pauses Its Third-Party Shipping Business to Focus on Its Own Packages

By Danny Vena – Apr 8, 2020 at 3:47PM

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FedEx and UPS investors are breathing a sigh of relief -- for now.

Amazon.com (AMZN 4.50%) will halt its third-party delivery business, dubbed Amazon Shipping, in the coming months. The business, which was being tested in select U.S. markets, was dedicated to moving packages not associated with Amazon's e-commerce operations, but picking up parcels from other companies and delivering them to consumers.

This put the company in direct competition with rival shipping giants FedEx (FDX 5.06%) and United Parcel Service (UPS 3.56%), whose stocks jumped on the news, up 7% and 4% respectively (as of this writing).

A woman speaking to a delivery driver in an van adorned with the Amazon Prime logo.

Image source: Amazon.

In a notification to those companies affected by the decision, Amazon wrote, "We understand this is a change to your business, and we did not take this decision lightly. We will work with you over the next several weeks so there is as little disruption to your business as possible." 

The move into shipping seemed a natural extension of Amazon's existing business, having developed a world-class logistics and delivery operation for its own packages. The company plans to pause the service in June and from there decide what its next move should be.

Amazon made the decision after the surge in business resulting from recent stay-at-home orders designed to slow the spread of the COVID-19 novel coronavirus. The company recently announced that it planned to hire as many as 100,000 warehouse workers and delivery staff to deal with the unprecedented demand.

The tech giant became its own biggest shipper in mid-2019, after a much publicized breakup with FedEx, as the company increasingly viewed Amazon as a threat to its business.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and FedEx and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$121.09 (4.50%) $5.21
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$168.89 (3.56%) $5.80
FedEx Corporation Stock Quote
FedEx Corporation
FDX
$159.12 (5.06%) $7.66

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