Who Wins and Who Gets Crushed by an Amazon-Owned Delivery Network

Retail and e-commerce industry execs have long expected Amazon to experiment with bypassing UPS and other big logistics players to deliver orders to customers’ doors itself. That time has reportedly come, according to The Wall Street Journal.

Amazon has not commented on the report, but former Amazon execs and industry observers I’ve spoken with believe it to be true.

The test, which is currently taking place in San Francisco, Los Angeles and New York, according to the report, has the potential to allow Amazon to make same-day delivery a regular occurrence. In e-commerce, that is huge.

Here’s a look at the impact of an Amazon-owned delivery network on rivals and other industry players.

Winners

Google Shopping Express and eBay Now: Both of these services offer same-day delivery of food, clothes and some other products from big-name retailers such as Costco, Macy’s and Whole Foods. While each has exclusive partners, there is some overlap, such as Walgreens and Target.

At first blush, Amazon’s arrival in the same-day delivery space sounds like a bad thing. But I think it will actually benefit one or both of these players for two reasons. First, Amazon’s entrance will likely increase customer awareness for same-day delivery services. And that, in turn, should lead to more customer adoption of these programs, taking more share from physical retailers.

The effect, industry execs believe, is that more big name retailers start partnering up with Google and eBay to get differentiated products into the hands of their customers as quickly as possible.

Losers

Slow-footed big-name retailers:: The smart ones will figure out a way to experiment with same-day shipping services, whether by partnering with Google and/or eBay or with younger logistics companies such as Deliv.

The rest, especially those that don’t offer a product selection all that different from what is available on Amazon.com, will be in bigger trouble than they already are.

UPS, FedEx: Amazon’s decision to go around these traditional logistics powerhouses to make deliveries in certain cities isn’t a good thing for them. But how hard it hits them will depend on how widely and quickly Amazon rolls out its own delivery network and how successful it is.

The answer to that last question isn’t a sure thing, as the delivery process that happens in the so-called “last mile” of the supply chain has the potential to be the most error-ridden and costly, some execs say. At the same time, it’s hard to imagine a significant near-term hit to these businesses, with Amazon accounting for less than a percent of revenue at both companies, according to the estimate of an analyst who spoke to The Wall Street Journal.

But with the move, Amazon surely has their attention. Amazon drives a ton of volume through these shippers and if Amazon succeeds at this local delivery network, UPS and FedEx will eventually feel it.

“Jeff thinks about all of the core assets as platforms and wants to drive maximum utilization through the platforms to get more efficient, achieve greater scale, build competitive advantage, etc,” one former longtime Amazon exec said in an email. “To drive scale and utilization, you need to put as much through the system as possible. So if they can execute on building out local delivery, their appetite (for what to put through the system) will be endless. They will think about it in terms of taking out UPS and FedEx.”

Too soon to tell

Walmart: The news definitely isn’t positive for Walmart, but the company has the logistics infrastructure and know-how to do something similar, according to industry execs. Whether they choose to, and how aggressive they would be, remains to be seen.

So far, the company has taken a conservative approach to experimenting with same-day delivery, only running pilots in two test markets. It has also said that in at least one of the markets, its customers prefer to order online and pick up at the store than to get the goods delivered to their homes. But if Amazon steps on the pedal, Walmart may be forced to get more aggressive.

This article originally appeared on Recode.net.

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