Originally published at: Commentary: FedEx and UPS need to move up the e-commerce food chain - FreightWaves
FedEx and UPS will not be major players in the B2C parcel market unless they strategically engage with an e-commerce marketplace, says commentator Satish Jindel.
Ah yes, Mr. Jindel…the former FedEx employee who now runs a 3rd party. Anytime you see an article for report by him know that it’s very slanted. You see the FedEx share price? Things are going very well and they are being strategic with theit e-com approach. Let someone else deal with the light weight parcel thats under a pound, there isnt money in that.
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I agree with everything Satish said in spite of the nicely improving trend at FedEx. He is talking about a more strategic timeline.
However, I think that they have bigger fish to fry. They have a melting ice cube on the B2C e-commerce parcel delivery segment.
I am going to keep it simple. Every time you or I stop ordering our fish oil on gnc.com and start ordering on Amazon or Walmart, the sucking sound you hear is one more package that has exited the FedEx (and UPS) addressable market.
Now, multiply that by a gazillion packages (which is a lot) over the next 3-5 years and the ice cube will be much smaller. When volumes skyrocketed in Covid, the cost per residential package went down a lot. Guess what happens when volumes soften - or even decline - over time?
Plus Amazon has a ton of Prime merchants who sell to healthcare products and SMB.
The tough part is that there is very little FedEx can do short of becoming a merchant and logistics company like Amazon. That, of course, would be a diabolically terrible idea.
With all due respect to my good friend Satish, there is nowhere near enough package volume from 100% of the Etsy-esque boutique marketplaces to replace the shrinking ice cube volume. However, there is no reason not to do it either.
Satish provided a thought provoking discussion. I am not smart enough to know what to do if I were still in Memphis. That said, I am rooting for them to figure it out.
Fedex still delivers many, many Walmart deliveries. Large, higher margin Amazon shipments have also found their way back into the network and will remain there for the foreseeable future.
Mr. Jindel’s Op-Eds are so easy to spot…FedEx and UPS have both been shifting away from low margin e-commerce packages in favor of higher margin B2B, pharma, etc. for the last several years and I wouldn’t anticipate that changing any time soon. The last mile startups can f1ght over that volume while experiencing significant margin erosion and complexity/overhead associated with last-mile services.