Last mile USA delivery has again been in the news with the recent headline concerning FedEx walking away from hundreds of millions of dollars of businesses with Amazon.     The headlines sort of skim off the top of well known trends that present challenges and opportunities for shippers and last mile delivery providers.

FedEx, UPS, and the USPS have earned billions of dollars from Amazon but Amazon is seeking more direct control of the last step in a delivery (i.e. last mile delivery).   The last mile delivery market's continued to growth is creating challenges and opportunities.   Existing carriers seek to protect their market position against new competition, technologies and methods.       Amazon Logistics is the first company since the founding of FedEx in the 1970's that is likely to make a change in this traditional capital intensive industry.

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Jet Worldwide works with international companies seeking e-commerce delivery solutions to the US, Canada and Mexico.

 

 

Scale matters... to a point to where is does not

While FedEx and UPS are enjoying the rise revenue, they are also fretting about the lower average revenue per shipment. Likewise, the USPS will certainly look to increase your Parcel Select prices on their largest customers.   Not coincidentally, USPS largest customers include FedEx (SmartPost), UPS (SurePost) and Amazon.

 

More volume no longer means lower unit costs. At least not in the near term.

FedEx decision to walk away from Amazon's business is not as big an impact as many would expect.  FedEx revenue from Amazon represents less than 1.5% of their total sales and it frees up this capacity for higher margin e-commerce volumes.

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Amazon going it alone?

Although the FedEx/ UPS do not officially consider Amazon a "peer competitor" it is clear that Amazon type scale is the first real challenge to the FedEX/UPS duopoly status. FedEx, in particular, seems keen to point out the difference in scale between Amazon logistics.

Amazon is taking control by building a fleet of delivery vans and contracting for capacity of an all cargo fleet of Boeing 767 cargo planes.   This expansion seems primarily driven by the need by Amazon to reduce the cost of their deliveries as a percentage of sales.

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Amazon is seeking to lower delivery costs by transferring volume from higher cost carriers to their own network and USPS.   Amazon's key last mile delivery initiative involves hiring "independent contractor/ drivers" in a way similar to the system of  FedEX Ground drivers.  

In general, it seems that Amazon is shifting  volumes from FedEx and UPS towards USPS and Amazon's rapidly growing delivery system.

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The opportunity for revenue growth for e-commerce last mile carriers is clear, the challenges include:

  • Lower revenue per shipment being reported by FedEx and UPS
  • USPS continued financial struggles
  • Amazon USPS contract expires in October 2019 with political pressure for a substantial increase in costs.
  • Legislative challenges to "independent driver status" which are the back bone of low cost parcel delivery for FedEx Ground and Amazon Logistics drivers and partners.
  • As regional carriers develop integrated IT solutions, they represent another alternative to the national carriers.

 

While the headlines will continue, the trend lines toward greater use of regional carriers and alternative last mile delivery solutions will continue.   Jet Worldwide works with international shippers seeking high volume parcel import processes including parcel purchase and pick up stations.

 

jet world wide international parcel delivery specialists

 

Written by Tim Byrnes