UPS, FedEx stocks fall after report of Amazon testing new delivery service

An employee stacks items to be shipped at the Amazon fulfillment center in Phoenix

Online retailing behemoth Amazon.com Inc.

The new program, reportedly called Seller Flex, began testing in India and has now begun on the West coast, the news organization reported, with Amazon letting more merchants know in advance of a broader rollout. While Bloomberg said this development doesn't necessarily cut UPS and FedEx out, Wall Street's reaction to the news, which caused shares for the delivery giants to tumble, suggests the move is expected to have negative effects on their businesses.

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 US states, is to expand the breadth of items available under Amazon Prime.

FedEx has announced that it will expand its same-day delivery service to 1,800 USA cities in 30 markets.

As part of the service, Amazon will oversee the pickup of packages from warehouses of third-party merchants and the delivery of those packages to consumers, the report said. When it comes to logistics, the science of getting stuff from point A to point B in the fastest, most efficient way possible, Amazon has changed how we ship in ways only a package company can really appreciate.

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FedEx shares were down less than 1 percent. It also helps to solve overcrowding at warehouses that use the Fulfillment by Amazon program, where third-party sellers send items for Amazon to store while they wait for a buyer.

FedEx said it wouldn't comment on Amazon's plans but pointed out the "scale, infrastructure and complexity" involved in running a global transportation network. There are many sellers on Amazon Central who use P.O. boxes for returns, and UPS does not deliver to P.O. boxes.

Amazon is likely FedEx and UPS' largest customer, due to the number of items that customers purchase from Amazon on a daily basis. The internet e-commerce giant is up 29 percent year to date through Wednesday versus UPS' 4 percent and FedEx's 19 percent returns. Now, Amazon will be able to deliver the third-party's products through its own service.

Amazon doesn't always offer the cheapest price for goods.

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