Home Headline News Amazon.com, Inc. (NASDAQ:AMZN) is flexing its muscles once again in logistics

Amazon.com, Inc. (NASDAQ:AMZN) is flexing its muscles once again in logistics

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Amazon.com, Inc. (NASDAQ:AMZN) is flexing its muscles once again in logistics

After the e-commerce giant ended $900 million worth of contracts with FedEx (NYSE: FDX) earlier this year, it’s found a new way to hammer its logistics rival. According to The Wall Street Journal, Amazon is now blocking its third-party sellers from using FedEx Ground for Prime deliveries, which are generally supposed to arrive within one day.

Amazon’s reasoning for the move was that FedEx Ground and Home were not fast enough to get customers their packages reliably on time. In an email to its vendors, Amazon told them they were not allowed to use FedEx Ground or Home “until the delivery performance of these ship methods improves.” They can still use FedEx Express.

FedEx played down the move, saying its impact would be “minuscule,” but for Amazon it’s easy to see the competitive strategy behind the decision, as it’s just the latest time the company’s pulled business away from partners.

A familiar playbook

Part of what makes Amazon such a difficult competitor is that it’s often a customer and a competitor at the same time. That means that as it builds out its own capacity in a business like logistics, it simultaneously pulls business away from rivals, dealing them a double blow as they lose Amazon’s business and must contend with a new fast-growing competitor at the same time.

For example, XPO Logistics (NYSE: XPO) shares plunged earlier this year after the company said that its largest customer, believed to be Amazon, pulled away its business in postal injection and other areas. FedEx shares barely flinched at the earlier break-up with Amazon, but what seems to be unique about Amazon’s latest move is that it’s leveraging its third-party marketplace to move business away from a rival and toward itself. 

Amazon’s marketplace now makes up a majority of sales on its e-commerce platform. It has an estimated 5 million sellers generating close to $200 billion in annual sales on its platform. If Amazon can dictate the way those sellers do business, that gives the company an enormous bargaining chip as it builds out its own logistics service and makes one-day delivery a reality.

Over the last four quarters, Amazon spent $34.1 billion on shipping costs,  far more than any other U.S. retailer, and that number is set to balloon given the company’s new one-day delivery promise.

An unbeatable network

The latest tiff with FedEx shows that Amazon’s greatest market power often extends from its stakeholders, namely its customers and vendors. By controlling about half of the country’s e-commerce sales, online sellers often need to be on Amazon’s website to find customers. If they’re not, they’re foregoing a huge market for their products.

However, their being on the website only gives Amazon more market power, and it drives internal demand for its shipping services that it can then leverage against competitors like FedEx. Amazon has also squeezed its third-party sellers for its own benefit by copying their products or forcing them to advertise on its site in order to get visibility.

A recent report in The New York Times details how the tech giant has used the same strategy with Amazon Web Services, copying products from suppliers and essentially checkmating them into doing business with it as they can’t afford not to be on the cloud-computing platform. 

It’s easy enough to imagine Amazon employing a similar strategy in new businesses like Amazon Care, its healthcare pilot, enticing Prime members to sign up for the service or its vendors to give it preferential treatment.

This network of powerful stakeholder relationships is part of what gives the company such a strong competitive advantage, but it also puts it at risk of antitrust concerns and calls for a breakup.

Either way, expect to see Amazon make similar moves in logistics and beyond as the company builds out new businesses to complement its dominant positions in e-commerce and cloud computing.    

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1,830.59.

The projected lower bound is: 1,740.61.

The projected closing price is: 1,785.60.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 88.9934. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 55.49. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 93 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 97. This is not a topping or bottoming area. The last signal was a sell 12 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

AMAZON COM closed down -6.630 at 1,784.030. Volume was 12% above average (neutral) and Bollinger Bands were 26% narrower than normal.

Open     High      Low     Close     Volume___
1,795.0201,798.2001,782.3601,784.030 3,354,137
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1,759.47 1,766.91 1,821.00
Volatility: 13 16 24
Volume: 2,906,932 2,920,021 3,574,446

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

AMAZON COM is currently 2.0% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into AMZN.O (mildly bullish). Our trend forecasting oscillators are currently bearish on AMZN.O and have had this outlook for the last 10 periods.

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