Amazon may be taking an even stronger hold on the delivery business 11:44 AM ET Fri, 9 Feb 2018 | 00:50 
 
 Amazon is gearing up to launch a delivery service for businesses, the Wall Street Journal reported on Friday. 
 
 This would pit the e-commerce giant against the likes of FedEx and UPS. 
 
 The service is called "Shipping with Amazon" and will see the tech giant picking up packages from businesses and delivering them to customers, the WSJ said, citing people familiar with the matter. 
 
 Amazon's business delivery is expected to roll out in Los Angeles in the coming weeks with third-party merchants that sell goods via its website. More cities are to follow. 
 
 The U.S. firm will eventually roll this out to other businesses with Amazon planning to undercut UPS and FedEx on price, according to the WSJ. 
 
 Shares of FedEx and UPS were sharply lower in pre-market trade on Friday morning. 
 
 UPS said it is still a partner of Amazon. 
 
 "UPS continues to support Amazon and many other customers and we don't make comments about their business strategies or decisions regarding their utilization of UPS services," a spokesperson for the company told CNBC in an emailed statement. 
 
 Read the full Wall Street Journal article here. ||||| Amazon.com Chief Executive Officer Jeff Bezos speaks during a keynote speech with Amazon.com Chief Technology Officer Werner Vogels at the AWS Re:Invent conference at the Sands Expo in Las Vegas, Nevada November 29, 2012. 
 
 SAN FRANCISCO Amazon.com Inc is planning a major roll-out of an online grocery business that it has been quietly developing for years, targeting one of the largest retail sectors yet to be upended by e-commerce, according to two people familiar with the situation. 
 
 While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items like electronics at the same time. 
 
 One of the people familiar with AmazonFresh's expansion plans said new warehouses will have refrigerated areas for food, but also space nearby to store up to one million general merchandise products, in some cases. 
 
 The company has been testing AmazonFresh in its hometown of Seattle for at least five years, delivering fresh produce such as eggs, strawberries and meat with its own fleet of trucks. 
 
 Amazon is now planning to expand its grocery business outside Seattle for the first time, starting with Los Angeles as early as this week and the San Francisco Bay Area later this year, according to the two people who were not authorized to speak publicly. 
 
 If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States, said one of the people. 
 
 Bill Bishop, a prominent supermarket analyst and consultant, said the company was targeting as many as 40 markets, without divulging how he knew of Amazon's plans. 
 
 An Amazon spokeswoman did not respond to a request for comment on Tuesday. 
 
 Amazon is searching for new, large markets to enter as the company tries to maintain a growth rate that has fueled a 220 percent surge in its shares over the past five years. The grocery business in the United States, which generated $568 billion in retail sales last year, may be a ripe target. 
 
 Amazon's expansion plans are a potential threat to grocery chains such as Kroger Co, Safeway Inc and Whole Foods Market, as well as general-merchandise retailers Wal-Mart Stores Inc and Target Corp, which also sell a lot of groceries. 
 
 "Amazon has been testing this for years and now it's time for them to harvest what they've learned by expanding outside Seattle," said Bishop, chief architect at Brick Meets Click, a consulting firm focused on retail technology. 
 
 "The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time," he said. "That's an awesomely scary prospect for the grocery business." 
 
 Kroger, Whole Foods, Supervalu and Safeway did not respond to requests for comment on Tuesday. Target declined to comment. 
 
 A successful foray into groceries could also help underwrite the development of a broad-based delivery service employing Amazon trucks to deliver directly to homes, which could have implications for UPS, FedEx and other package delivery companies that currently ship Amazon goods. 
 
 Still, groceries have proven to be one of the most difficult sectors for online retailers to crack. One of the most richly funded start-ups of the dot-com era, Webvan, was a spectacular failure as the cost of developing the warehouse and delivery infrastructure proved overwhelming. 
 
 Roger Davidson, a former grocery executive at Wal-Mart and Supervalu, said Amazon will struggle to make money from AmazonFresh because fresh produce can easily go out of date in storage warehouses and get damaged during delivery - something known as "shrink" in the business. 
 
 "Will it work? I would bet against it," Davidson said. "The reasons these businesses have failed in the past have not gone away." 
 
 COMPETITION 
 
 Still, Amazon is not alone in wanting to expand in the online grocery business. 
 
 Wal-Mart is testing same-day and next-day delivery of online grocery and general merchandise orders in the San Francisco Bay Area and operates a grocery delivery business in Britain. 
 
 "We are ready and able to expand grocery delivery in the U.S. as the market demands," Wal-Mart spokesman Dan Toporek said. 
 
 FreshDirect delivers food to homes and offices in some parts of New York City and its trying to expand its service into the Bronx. 
 
 Peapod, owned by international food giant Royal Ahold NV, says on its website that it is the largest Internet grocer in the United States, delivering more than 23 million orders across 24 markets. 
 
 Davidson, who worked with Peapod for several years during stint at Ahold USA, said Peapod struggled to make money for most of its existence. But he believes it now turns a small profit due to supply chain efficiencies, population density in Chicago and its connection to brick and mortar stores on the east coast. 
 
 Davidson favors a strategy he called "Click and Connect" which is being used by Harris Teeter, a food and pharmacy chain on the East Coast of the United States. Customers order food online and choose a time to pick up the produce from designated areas outside the company's stores. There is a $4.95 service fee for this. 
 
 "Traditional grocery retailers will likely fight back against Amazon with Click and Connect," he added. 
 
 It is not clear whether AmazonFresh in Seattle is profitable because Amazon does not disclose results from the business. 
 
 Amazon Chief Executive Jeff Bezos was asked about the business during the company's annual shareholder meeting last month and he said that the team had "made progress on the economics over the last year." 
 
 "They've been doing a lot of experiments and trying to get the right mixture of customer experience and economics," he added. 
 
 COMBINED ORDERS 
 
 If online orders also include higher-margin general merchandise such as digital cameras, then AmazonFresh has a chance at profitability, said Manfred Bluemel of Zeitgeist Research, who was head of market research worldwide at Amazon until late 2010. 
 
 "Grocery is a frequency business. If Amazon can deliver to consumers' homes two or three times a week, they can up-sell other items," he said. 
 
 Bluemel said AmazonFresh's expansion will likely focus on areas where Amazon already offers same-day delivery, or will do so soon. 
 
 Amazon offers same-day delivery in several cities including New York, Washington D.C. and Chicago, and since last year the company has been building new distribution warehouses on the outskirts of the Los Angeles and San Francisco Bay areas. 
 
 (Reporting by Alistair Barr; Additional reporting by Dhanya Skariachan and Lisa Baertlein; Editing by Jonathan Weber and Tim Dobbyn)
– Amazon isn't just expanding grocery deliveries: The company will soon offer a shipping service for businesses, putting it in direct competition with UPS and FedEx, whose shares saw sharp declines in pre-market trading Friday, per CNBC. "Shipping with Amazon" will see Amazon pick up packages from third-party merchants who sell on Amazon's website before shipping them to buyers at lower rates than offered by UPS and FedEx—though Amazon may have to use those companies to reach areas beyond its delivery network, sources familiar with the plan tell the Wall Street Journal. The service is expected to debut within weeks in Los Angeles, where a pilot program has been in the works for more than a year. The service could be expanded to more cities, possibly this year. "We're always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices," a spokeswoman says, without offering specifics, though the Journal notes "Shipping with Amazon" could eventually be offered to other businesses, too. Sources say Amazon will be able to undercut UPS and FedEx because it already delivers some of its own orders in 37 cities. "Any extra space it can fill in its trucks with additional deliveries is considered added revenue," the Journal reports, noting Amazon eventually hopes to offer two-day deliveries, even on weekends.