New Amazon venture rocks shipping and logistics industry

Seattle-based Amazon has announced the launch of Amazon Supply Chain Services, which will make the company's freight distribution, fulfillment, and parcel shipping operations available to any business.

That would be in direct competition with the likes of UPS and FedEx.

And clients don't have to sell on Amazon's marketplace to make use of the service. GeekWire editor and co-founder Todd Bishop was among the first to report on this new development.

He spoke to KUOW’s Kim Malcolm.

This interview has been edited for clarity.

Kim Malcolm: How much of a bombshell is this?

Todd Bishop: It's giant. This is Amazon getting into a whole new area. It has implications for people and companies across the [shipping] industry, and you're seeing it ripple throughout Wall Street. It's not entirely unexpected, but it's a big deal.

Let's dig into how this is going to work. What kinds of clients do you expect to make use of this new service?

It's going to be available to any business of any size across any industry. Amazon gave a sense for that kind of breadth in their announcement today. They named companies that have been testing this, including Procter and Gamble and 3M, Land's End, and American Eagle, and they're doing everything from moving raw materials to factories to actually shipping products to doorsteps.

You write that Amazon competitors like Shopify and Walmart can use this service. How likely do you think that's going to be?

The way that's going to happen is that companies that are selling on Walmart's marketplace or using Shopify to power their own stores will be able to use Amazon, whether or not those companies are Amazon sellers themselves. That's the big change that we're seeing here. Amazon has been kind of inching up to this over the years.

They've been, obviously, taking their own internal capabilities to ship packages, extending those first to sellers on Amazon, and then, over the past couple years, we've seen them offer that to sellers who are also doing things through their own stores, from their own warehouses, from Walmart and Shopify. Now, the difference is any company is going to be able to take advantage of Amazon's logistics service.

You said Amazon has been walking up to this for a little while already. Do they have the capacity they need to fulfill what these businesses are going to want from them?

It sure seems like it. If you look at the stats, Amazon has more than 200 fulfillment centers across the United States, tens of thousands of trailers and containers, more than 100 aircraft. The company delivers 13 billion items annually. So, the infrastructure is there, and certainly, they can fulfill more incremental volume. The question is how much.

To me, having covered Amazon over the years, it's clear that they would not be making this kind of move if they didn't feel like they had the capacity to satisfy whatever demand they expect. And this is a company that's pretty remarkable in its ability to quickly expand.

One of the main reasons we saw them roll out their Delivery Service Partner program, which is the trucks that deliver packages to doorsteps, was that UPS and FedEx were not really doing the job over the holiday season one winter, and they just decided to take matters into their own hands. So, this is a company that sees opportunities and capitalizes on them.

Amazon is entering a field where there are established competitors. You mentioned UPS and FedEx, of course. What does this new service mean for them?

Some very stiff competition out of the gate. It was fascinating to see the reaction on Wall Street this morning. Both UPS and FedEx stocks were down by about 9%, which is meaningful in terms of their overall market value. Amazon had already surpassed both companies in overall parcel volume last year, just based on its own fulfillment.

So, now you can see Amazon going explicitly after some of the same corporate logistics contracts that UPS and FedEx depend on, and this is real competition for these two companies.

Listen to the interview by clicking the play button above.