On Thursday of last week, USPS reported its final quarterly results. With these numbers, it looks like the losses incurred by the company for the whole of 2019 are nearly $9 billion.
The earnings call was to be the final one given by current Post Master General, Megan J. Brennan, who will be retiring next year.
It was, at times, contentious.
Brennan was asked on several occasions about decreasing parcel volumes, particularly in light of the loss of business from the likes of Amazon – as well as other carriers such as UPS and FedEx. At one point, after being asked how USPS planned on overcoming the loss of such large partners, she stated: “We are not conceding any of that business.”
What the Loss of UPS, FedEx, and Amazon Means for USPS
Regardless of Brennan’s deflections, the fact that USPS has lost business from UPS, FedEx, and Amazon has massive implications. Come Jan 1, 2020, USPS will lose nearly 2 million parcels a day from FedEx. In addition, Amazon has cut its business with USPS in half and UPS is now doing 35% of its own last-mile deliveries.
According to the numbers released last week, parcel and shipping traffic rose less than 1%, with the numbers being in the negative for the fourth quarter. However, revenues did increase – largely a function of rate increases.
Given that the full impact of its losses from UPS, FedEx, and Amazon’s business is yet to be felt, these are not good trends.
Why UPS, FedEx, and Amazon are Moving Away from USPS
Over the last few years, a huge shift has been occurring in the parcel space. Powered by the incredible growth of eCommerce, carriers have begun fighting for more ownership of eCommerce shipping. In addition, the biggest player in the online retail space, Amazon, has continued in its slow move towards becoming a carrier in its own right. As a result, the intermingling of business between these players and others has begun to diminish.
Here are just a few examples from the last year:
- FedEx Ended its Relationship with Amazon
- FedEx and UPS Announce Sunday Shipping Service
- FedEx Launched “Freight Direct” for “bulky” items purchased online
- Amazon Offers Low-Rate Ground Services
Looking to 2020… and Beyond
As we wind down 2019, it looks like 2020 might prove to be the turning point – what was, until now, a “cold-war” between carriers (including Amazon) may now become an all-out battle. The above examples of smaller moves made in 2019 will likely be added upon as all players involved battle it out for eCommerce business.
Amazon will be interesting to watch. As they continue their march towards becoming a full-fledged carrier while phasing out their relationships with other carriers, conflicts are certain to arise. These will likely play out in the form of canceled contracts, pricing wars, and new offerings (like FedEx’s “Freight Direct”).
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