For decades, UPS and FedEx basically had a duopoly in the shipping industry. Yes, they faced some competition from the U.S. Postal Service, DHL, and regional carriers, but almost every company that wanted to ship nationwide had to contract with one of the two parcel delivery carriers.

In recent years, that started to change. While FedEx and UPS still dominated the marketplace other companies began to assert themselves. First, in the five years since USPS updated its Priority Mail service, it has eaten into these companies’ market share in the small parcel space.

Further, Amazon began to offer distribution services, possibly laying the groundwork for a shipping service of its own. Major legacy retailers, including Walmart and Target, have begun to move into the shipping space too.

Now, UPS and FedEx’s future dominance is in question. For shippers, that could be a good thing.

Related: Compare Shipping Rates: Your 2018 Carrier Rate Increase Guide

How Delivery and Parcel Logistics is Changing

Amazon Prime, the membership service that gives customers free two-day shipping on a host of products, has transformed the shipping industry in its 13-year life.

The average American ordered 15 packages online in 2016. About one in four Americans has a Prime membership. And nearly one in five Americans are now unwilling to wait any longer than two days for their packages. Customers expect two-day shipping to be an option, if not retailers’ default.

Amazon initially hired FedEx and UPS to deliver its packages, just like most retailers. But now, the e-commerce business giant is experimenting with new parcel service options.

These include parcel lockers, where delivery drivers can leave packages and customers can pick them up at their convenience. This makes delivery more efficient and more cost-effective — for Amazon, although not for delivery companies. And in the United Kingdom, Amazon is piloting 30-minute delivery by drone. FedEx and UPS don’t appear to be moving toward drone delivery, so as Amazon’s program expands, it seems most likely the company will make those parcel deliveries itself.

Finally, Amazon’s decade-old fulfillment service has allowed third-party sellers to ship through its fulfillment centers — using Amazon’s network, but FedEx and UPS planes and trucks. Now, Amazon’s Seller Flex program allows those sellers to pay Amazon to pick up and deliver those items to customers, without passing through Amazon warehouses.

For now, Amazon says the expansion of Seller Flex nationwide in 2018 will make more third-party items eligible for Prime, but it will continue utilizing FedEx and UPS. Industry experts point out, however, that Seller Flex lays the groundwork for an Amazon-owned delivery service.

Underlying Amazon’s moves are FedEx and UPS’s ever-increasing rates. Both companies have implemented across-the-board rate increases of just 4.9 percent for the last two years. Surcharges and fees continue to grow as transportation and labor costs rise. In some cases, including Amazon’s, it’s starting to make more sense for retailers to bring shipping in-house.

Other Companies Moving into the Shipping Space

In December, Target bought same-day delivery startup Shipt. The $550 million acquisition will allow Target to deliver groceries, household essentials, and electronics directly from its brick-and-mortar stores to customers’ doorsteps the same day.

Kantar Retail analyst Robin Sherak told Bloomberg that Target’s purchase demonstrates “how serious they are” about moving into the logistics space. “It’s also a realization that Amazon, this big technology disruptor, has entered the consumer landscape,” she said.

Earlier in 2017, Target bought Grand Junction, a software startup whose platform helps e-commerce companies and distributors manage local shipments through a network of local and regional carriers.

Walmart, too, announced last year that it would start shipping its own products. Free two-day shipping is available for household essentials, baby needs, pet products, food and toys, and available for orders of more than $35. Walmart was already operating same-day in-store pickup in locations across the country.

“Two-day free shipping is the first of many moves we will be making to enhance the customer experience and accelerate growth,” Walmart U.S. eCommerce President and CEO Marc Lore said in a company announcement.

It’s not just Amazon anymore — two of America’s largest legacy retailers have moved into the shipping space. That means FedEx and UPS have lost, or are on the brink of losing, some of their biggest clients.

More competition in delivery and logistics, which has for so long been a duopoly, could be very good for companies who rely on FedEx and UPS. First, they’ll have more choices, which tends to lower prices as shippers compete for retailers’ business.

Further, savvy executives will recognize that FedEx and UPS need their business more than ever before — giving them new leverage in contract negotiations and the opportunity to reduce their own shipping spend.

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