Delivery Wars: Is Amazon a Threat to FedEx, UPS?

Some analysts are warning that Amazon’s new venture could put pressure on delivery rates and steal business from the transport giants. Yet Credit Suisse analyst Allison Landry has shrugged it off as “more noise than anything of substance,“ arguing that FedEx and UPS handle residential deliveries for only a small subset of Amazon third-party sellers.

…the high level takeaway is that we do not see a material impact to either FDX or UPS. We believe that the rollout of the Seller Flex strategy is more of a shuffling of packages within the USPS network itself, where we think Amazon will be able to use it scale and density to achieve a lower cost per package while at the same time expediting delivery times for its current third-party self-fulfilled non-prime sellers. However, what is in effect a ‘”trade up” in service may add some pressure to an already capital-deprived USPS network – which in part supports our long-term thesis that shipping rates will rise…we believe the overall impact to FDX and UPS is negligible.

But what about XPO Logistics (XPO). Landry noted that the company recently announced that it plans to expand its last-mile footprint in the U.S.

XPO appears to be the only asset-light logistics player with enough scale in a range of traditional and specialized markets that are suited to provide an integrated, scalable eCommerce solution. For this reason, we would not be surprise if XPO was already working behind the scenes fairly extensively with Amazon to develop fulfillment and distribution strategies that can support continued growth.

Shares of UPS inched 0.2% higher in pre-market action to $118.49, while FedEx sat unchanged at $221.61.