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Is Amazon (AMZN) Ready to Deliver Shipments With Seller Flex?

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“Seller Flex” is reportedly Amazon.com, Inc.’s (AMZN - Free Report) new delivery service where the company itself will pick up packages from third-party merchant warehouses and deliver them to customers, a function currently handled by its long-time partners United Parcel Service (UPS - Free Report) and FedEx (FDX - Free Report) .

It sounds like a new service but the retail giant started testing it two years back in India and this year in West Coast states, per a Bloomberg report. A broader rollout is expected in 2018.

We observe that Amazon shares have gained 30.8% year to date, underperforming the 51.3% rally of the industry it belongs to.

The couriers could still be in use but Amazon will take the final decision regarding how a package is sent rather than leaving it up to the seller.

So basically, the company is increasing its own control and reducing reliance on courier partners and third-party merchants in the process of delivering products.

But Why?

It appears that Amazon is seeking greater flexibility and tighter control over its inventory management and supply chain. This will help it reduce congestion of its own warehouses (by avoiding merchandise of outside sellers), make deliveries quicker and impress shoppers by better managing last mile deliveries and last-minute holiday orders.

So, shoppers can expect more items qualifying for the two-day shipping program and far more growth for Amazon.

Amazon.com, Inc. Revenue (TTM)

Should its Courier Partners Hit the Panic Button?

Well, we believe yes, supposing that they have read the company they have partnered with for so long. Amazon has never hesitated in doing what it believes could bring more customers under its umbrella and giving them reasons to stay. That’s part of its long-term plan and a huge cash balance and technological prowess back its implementation.

While Amazon may not immediately do away with its courier partners, it is certainly reducing reliance on them and building alternatives/supplements by developing its own global logistics.

And What’s Beyond That?

Just as what Amazon did with its online retail platform and AWS that is offering the same platforms it built to handle its own business as a service.

We all know that Amazon has been pushing its own logistics in recent years through investments in fulfillment centers, trucks and containers and its Fulfillment by Amazon (FBA) service has been doing well. It has also bought some planes and self-designed drones that are in the works.

So, if on a fine day, Amazon starts offering its logistics to outside parties, it should not come as a surprise.

Zacks Rank and a Better Pick

Amazon has a Zacks Rank #5 (Strong Sell).

A better pick from the broader technology space would be Applied Materials (AMAT - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s Zacks Consensus Estimate for 2017 earnings of $3.23 reflects year-over-year growth of 84.3%. Moreover, its earnings are expected to register 14.5% growth in 2018. The stock has long-term expected earnings per share growth rate of 17.1%.

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