Amazon.com (Nasdaq: AMZN) just moved one step closer to world domination.
The king of online retail has already torpedoed the prospects of shopping malls and grocery stores this year. Now Amazon has United Parcel Service (NYSE: UPS) and FedEx (NYSE: FDX) in its crosshairs.
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Amazon is prepping to take on the big delivery companies with a new program called Seller Flex. The program does two things. First, it will allow for more third-party products to join Amazon Prime items that are available for two-day delivery. And Amazon will take the lead in shipping these products, leaving UPS and FedEx out of the process.
"Amazon taking greater control over the logistics of its third-party packaging gives online shoppers a more consistent experience and gives Amazon greater flexibility," Business Insider explains. "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."
The delivery space is getting frantic these days as Amazon's competitors rush to stay relevant. Costco is upping its home delivery game, The Wall Street Journal reports, offering two-day delivery on some food items. It's also working with a startup called Instacart that offers one-day grocery delivery.
Meanwhile, Walmart just bought New York delivery company Parcel, which specializes on same-day delivery of groceries and other items.
Of course, the big question on our minds right now is whether the big delivery services like UPS and FedEx survive the Amazon blitzkrieg.
So far, the market is telling us these massive stocks will be just fine.
As you've probably already guessed, FedEx and UPS are both important components of the Dow Jones Transportation Average. We've been following this group closely, tracking a potential breakdown in August that turned into a massive rally. The bears couldn't push these stocks beyond the brink of disaster, and the fast drops we witnessed ignited massive rallies throughout the transportation sector.
In fact, since the transports bottomed out in late August, they've outperformed Amazon stock by a mile. The Dow Jones Transportation Average has rocketed higher by 9%, while Amazon is up just a little more than 2% over the same timeframe (FedEx and UPS shares are up 8% and 4%, respectively).
While FedEx and UPS shares have pulled back slightly since the announcement, both stocks remain within striking distance of their year-to-date highs.
Compared to how grocery stocks imploded after Amazon announced its Whole Foods buyout back in the summer, the reaction we're seeing from the big delivery stocks has been miniscule. That's probably because Amazon moving in on their turf has been an ongoing event. The stock market hates surprises. Rolling out the Seller Flex program is the next logical piece of the puzzle everyone was waiting for -- unlike the bombshell Whole Foods acquisition that surprised just above everyone.
For now, Amazon and the big delivery companies still need each other. The transportation melt-up continues to survive. Amazon hasn’t squashed this powerful trend just yet...
This article originally appeared on The Daily Reckoning.