Amazon is reportedly expanding its own delivery service - and it should terrify FedEx and UPS

Getty/Scott Olson

An Amazon warehouse worker fulfills Amazon orders.

• Amazon is testing a service that bypasses the need to ship third-party merchandise through package handlers like UPS or FedEx.
• Called FBA Onsite, the service was recently expanded, according to Bloomberg.
• The service is seen as an improvement to Amazon's popular Fulfillment by Amazon program.

Amazon isn't messing around with delivery.

A new program allows more items on Amazon - even those sold by third parties - to be listed with the Prime badge of two-day shipping.

The program has now been expanded, Bloomberg reports.

Previously called "seller flex," the program has been renamed "FBA Onsite." FBA stands for fulfillment by Amazon, which is Amazon's program for third-party sellers that want to send their stock to Amazon to house in its own warehouses and then dispatch them like first-party Amazon merchandise.

The important bit here remains: Amazon itself handles the pickup of packages from sellers. In some cases, it also handles delivery to customers. That completely eliminates the need for major delivery partners like UPS and FedEx, which make the bulk of their revenue from shuffling around packages - a large portion of which carry the Amazon arrow.

Those delivery companies are still used in some instances, Bloomberg noted, but Amazon will still be shipping the product to customers instead of relying on a third party to get it there.

Amazon taking greater control over the logistics of its third-party packaging gives online shoppers a more consistent experience and gives Amazon greater flexibility. It also helps to solve overcrowding at warehouses that use the Fulfillment by Amazon program, the popularity of which has strained Amazon's logistics, Bloomberg says.

FBA Onsite was tested on the West Coast before its expansion. Amazon previously tested it in India for two years.

In a similar move dating back to 2016, Amazon introduced the Seller Fulfilled Prime program, which allowed third-party sellers to sell with the Prime two-day shipping guarantee if they could prove that that time frame was feasible even if the items didn't ship from Amazon's warehouses. FBA Onsite improves on this because Amazon is able to deliver much cheaper shipping costs than a seller would be able to.

EXCLUSIVE FREE SLIDE DECK:
The Future of Retail 2018 by the BI Intelligence Research Team.
Get the Slide Deck Now »