Displaying items by tag: usps
Fedex and Amazon are in the middle of an ugly spot. Anyone paying attention over the last few years will be aware of the “frenemy” relationship between Amazon and logistics providers, as the company offers a lot of business but hammers margins and is stealing away business with its own shipping network. Well, Fedex finally said enough is enough and decided against renewing its ground shipping contract with Amazon. Therein lies opportunity, however, as it should offer UPS a lot more business.
FINSUM: This is a bold move by Fedex. We expect it will hit revenue slightly, but probably not wound profits too badly. It could give UPS and USPS a boost.
It is no secret that President Trump is not a fan of Amazon. From his campaign right through until the present he has constantly threatened the company. Now he might have some fuel added to his fire. Amazon is currently putting tons of investment into expanding its logistics business, which will ultimately pose a threat to the United States Postal Service. Trump has already said that Amazon abuses USPS, and this will only embolden him. Trump wants USPS to double the rates it charges Amazon.
FINSUM: USPS lost almost $3 bn last year and hasn’t turned a profit in a decade. It does seem like Amazon is getting an unfair subsidy, but then again, it is up to USPS to set its rates.
While logistics companies have understandably done well alongside the rise of ecommerce, FedEx might be poised to deliver something particularly special in the medium term. There are two big reasons why. The first is that the US postal service looks likely to raise its rates, which would make the margin between USPS and UPS/FedEx smaller, giving an edge to the latter. Additionally, FedEx has been investing heavily into upgraded distribution hubs which will give it a speed advantage over UPS. UPS, on the other hand, is just at the beginning of that process, so the recent status quo of UPS having higher margins looks set to end.
FINSUM: We think we might be entering a few golden years for FedEx, as their upgraded speed of delivery, combined with more competitive pricing, will be an “x” factor given the ever growing demand for quick delivery.