3 giants are fighting to win your shipping contract, and the gloves are off. Learn more about this battle royale and what it might mean for your logistics budget.
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Take a ringside seat for our latest article and find out why FedEx and UPS are now facing a new challenger: Amazon. The Big Two are looking at a very different carrier landscape in 2020 and beyond, and it’s one that may or may not mean good news for shippers. Either way, 71lbs will be here to fight your corner.
FedEx and UPS are two of the world’s largest carrier companies, squaring off against one another with USPS and DHL providing some stiff competition. UPS and FedEx have always seemed able to one-up each other somehow, making them both perennial prime contenders for the top carrier title. At least they were, until the largest company in the world stepped into the ring.
Amazon has begun to bring its billions to bear on the carrier sector and is looking to knock all competition out of the running. It has the funds, the network and the consumer faith to do it, too. Here’s what a clash of carrier titans means for shipping departments.
The impact on FedEx and UPS
Going strictly by the numbers, FedEx can handle Amazon’s ascendance somewhat better than UPS can. FedEx — who already cut ties with Amazon last year — relied less on Bezos’ business than UPS did, losing only 1.3% of their overall parcel traffic after parting ways. The word “only” is relative here, of course, since a report in the Wall Street Journal revealed that percentage to be worth $900 million annually.
UPS, on the other hand, has yet to cut ties with Amazon and is reported to rely on the latter for between 7% to 9% of its total revenue. That’s a lot more to lose than FedEx did by going it alone, plus UPS faces the thorny issue of being in business with an increasingly influential competitor. We wouldn’t be surprised to see a split here, too, and perhaps sooner rather than later.
The question now is: How will FedEx recoup that $900 million loss? And if UPS follows suit, how will it claw back an even greater hit to its bottom line? The answer seems clear: Their customers may well see subtle (or not so subtle) increases in any number of service charges.
This seems counterintuitive. With Amazon providing even more competition for established carriers, why would UPS and FedEx hurt their chances of winning contracts by raising rates? We’ve seen these two fight it out for a long time here at 71lbs and lowering charges hasn’t exactly been at the top of their list for beating the competition. They may surprise us, but we doubt it.
What does Amazon bring to the ring?
For one thing, the company’s delivery ethos is already legendary; one so embraced by the public that the speedy Amazon standard has become the benchmark for every retailer, online or otherwise. The positive pressure Amazon exerts on its competition is bound to put the squeeze on FedEx and UPS to up their performance if not lower their prices.
Amazon may indirectly have a positive effect on shipping departments no matter which carrier they use, but it’s still showing the competition no mercy. Late last year, Amazon forbade its third-party shippers from using FedEx for any Prime ground deliveries. The announcement came at a time when Amazon was already delivering more than half of all its U.S. packages by itself.
Amazon is also targeting communities directly to become part of their growing Amazon Logistics wing. It offers enticing incentives for people to start their own businesses as an Amazon Delivery Service partner, incentives like low startup costs, a people-centric approach, and full support from and access to Amazon’s powerful resources.
“Low startup costs” equate to $10,000. Amazon’s competition may breathe a sigh of relief that not many will be flocking to their flag with such a steep figure, but Amazon has a haymaker ready there, too. It’s offering to give that money to their employees — plus three months’ pay! — to go out there and spread Amazon’s delivery presence.
Amazon also has its eyes on the skies both with cargo planes and aerial drones. The Amazon Air Network expects to have 70 aircraft up and running by next year and to slash the already swift 48-hour Prime delivery window down to 24. Overall, it’s a very impressive expansion into the carrier sector and one that should shake up the status quo in as little as a year.
Why you’ll always win with 71lbs
There’s a big fight ahead, and it may or may not lead to favorable rate shifts for your shipping department. 71lbs will be keeping a close eye on things as always, scrutinizing our customers’ invoices and relationships to ensure they get the service they deserve. No matter which carrier you choose, let our team look after the fight for great value while you get on with business.
At 71lbs, we focus on two things: a) helping customers save money on shipping, and b) helping customers understand their shipping costs. We provide refunds and savings on shipping insurance, freight, and imports, among other benefits. Our automated dashboard displays easy-to-understand shipping costs and insights so you can make better business decisions. Drop by the contact page to get in touch!
