UPS increased shipments in Q4 are a direct result of Amazon
by Rockwell Sands @

UPS Shipments Increased 9% in Q4 Thanks to Amazon

Amazon relies on UPS more heavily after FedEx split; UPS shipment volume jumps significantly as a result

2020 is off to a good start for the United Parcel Service (NYSE:UPS). Thanks to the recent FedEx and Amazon fallout, UPS reported that the company’s shipments increased 9% in the fourth quarter of 2019. Interestingly enough, UPS’ stock price hasn’t responded positively to the news. Instead, shares are down to $103.97 from $116.81 in the middle of the week (the first figure reflects the share price at the time of publishing this article).

The Increase In UPS Volume: FedEx’s Loss, UPS’ Gain

No doubt about it, UPS attests that the 9% increase in the company’s shipments is a direct result of Amazon’s split with FedEx. The eCommerce behemoth relied on UPS more heavily ever since severing ties with FedEx, which took place in the summer. The period of time that followed included the record-breaking 2019 holiday delivery and return season. 2019’s holiday season alone injected an enormous amount volume into UPS’ network. All in all, FedEx’s loss has proven to be UPS’ gain.

All of this being said, it should be noted that Amazon never relied too heavily on FedEx. Over the past two years, FedEx only ever handled less than 2% of Amazon’s delivery volume. In addition, Amazon deliveries only accounted for 1.3% of FedEx’s revenue in 2018. Therefore, while FedEx didn’t stand to lose too much by cutting ties with Amazon, UPS stands to benefit quite a bit.

Amazon May Stop Using Any Shipping Carriers Relatively Soon

While other carriers may benefit from the FedEx and Amazon breakup, it could be a negative indicator for the long-term. Since 2017, Amazon has steadily relied less on all of the major carriers. In fact, analysis shows that Amazon’s biggest shipper is now Amazon itself. Considering that Amazon accounts for 50% of global eCommerce, this isn’t good news for any carrier. That 50% figure represents an overwhelming amount of shipments that UPS and USPS could benefit from delivering. Not to mention an overwhelming amount of potential revenue.

UPS, however, doesn’t seem to be worried about the looming reality of Amazon pulling away. On Thursday, CEO David Abney provided a quote that conveyed confidence.

“As long as there’s a mutually beneficial relationship, then we will continue and we will find ways to win together,” said Abney.

On top of taking on more of their own shipping, Amazon has been quietly expanding its in-house delivery network. Drones are now a part of Amazon’s delivery fleet. The company also even went as far as to break ground on an airport in Kentucky to serve as a central delivery hub for the United States. All of these investments in their own logistics network are a financial commitment to fulfill Bezos’ vision of making same-day delivery a reality for all of Amazon’s Prime customers. If Amazon continues moving in that direction, that reality may come sooner than we think…and the company may leave every other carrier in the dust, right next to FedEx.

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