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Royal Mail shares wobble after Amazon reveals delivery plans

Margi Murphy
Amazon boss Jeff Bezos - 2016 Getty Images

Shares in delivery companies tumbled after a reports that Amazon is set to launch its own package delivery system.

"Shipping With Amazon" will be a direct competitor to UPS and FedEx in the US when it begins its delivery service in Los Angeles over the next few weeks.

"We are always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices," an Amazon spokesman said. 

If a success, it is likely that the service will become available in the UK, putting pressure on its current shipping partner, Royal Mail. 

The British postal firm's shares wobbled following the announcement, dipping 1pc in the afternoon. UPS was down more than 6pc in early trading Friday, while FedEx dropped 5pc. 

Royal Mail workers at a sorting office Credit: PA

Founder Jeff Bezos has previously criticised the Royal Mail’s service in the past.  In 2016 he told a conference that it had been struggling to handle up to half of Amazon’s orders, because it "did not have the capacity" to cope at peak times.

The UK parcel market was estimated to be worth nearly £10bn in 2017, with Royal Mail, Hermes and Yodel dominating. Royal Mail, which has previously outlined parcel delivery as a key growth avenue for the formerly state-owned postal service, said it did not wish to comment on the matter.

Amazon's foray into its own shipping service shows its knack for grabbing profit from services initially created to alleviate obstacles it faced in the day-to-day running of its main business channels. For example, its booming cloud service, Amazon Web Service (AWS), was created to host its burgeoning online marketplace in 2002 but is now a subscription business for individuals, governments and corporations around the world to use its hosting service. 

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Coupled with an aggressive acquisition strategy, which has seen it snap up food retailers including Whole Foods as it pushed out its own online grocery service, book retailers ahead of its launch of Kindle e-readers and podcast and streaming companies for entertainment on its line of devices, this has helped Amazon become one of the most valuable companies on the planet.

Mr Bezos, the world’s richest man, added billions to his fortune last year when it took in a bumper profit of almost $3bn, a record for the company. But it makes less than its technology giant rivals Apple and Google, which made $48.4bn and $12.6bn, respectively.  

Mr Bezos spotted the demand for near instant shipping as consumers turn to online shopping and offers unlimited next-day delivery service for Prime subscribers, who can also access to its video streaming service.

Amazon is testing a Prime Air service in which it will use drones to deliver packages within 30 minutes of an order. Trials took place in Cambridge, UK, in 2016, aided by Britain’s more lenient aviation rules. Amazon’s warehousing growth in the UK has ramped up of late, with an expansion five times larger than any rival in 2017, research from property agency Savills found.