Connect with us

darrens web page full of stuff to help people in health wealth & life in general

darrens web page full of stuff to help people in health wealth & life in general

Morgan Stanley is sounding the alarm on Amazon’s logistics network for UPS, USPS, and FedEx — with a chilling estimate of up to $100 billion in revenue slashed from the giants

Donald Trump

Morgan Stanley is sounding the alarm on Amazon’s logistics network for UPS, USPS, and FedEx — with a chilling estimate of up to $100 billion in revenue slashed from the giants

Amazon is rapidly in-housing its transportation network.A recent report from Morgan Stanley highlighted why UPS, USPS, and FedEx should be worried — to the tune of nearly $65 billion.That’s because the e-commerce company will carry 6.5 billion of its own packages and 3.5 billion non-Amazon packages by 2022, Morgan Stanley estimated.Visit Business Insider’s homepage for…

Morgan Stanley is sounding the alarm on Amazon’s logistics network for UPS, USPS, and FedEx — with a chilling estimate of up to $100 billion in revenue slashed from the giants

UPS and FedEx have often shrugged off the threat of Amazon. FedEx’s founder and CEO, Fred Smith, has often referred to the idea that Amazon could compete with the $65 billion transportation giant as “fantastical.”

A Goldman Sachs report from July bolsters that standpoint. That note to investors said Amazon Logistics would need $122 billion just to match the networks of UPS and FedEx, while additional air hubs and international operating facilities would command the most cash.

But an extensive report from Morgan Stanley’s freight-transportation team, partnered with its internal data researcher AlphaWise, provides another bullet point for Amazon Logistics bulls. The report outlined where Amazon Logistics is today and how its growth could be a poignant threat to the bottom lines of FedEx, UPS, and the US Postal Service.

The numbers came from an analysis of some 70,000 orders from 300 US shoppers over nine years.

“Simply put, the already large and quick ramp of Amazon Logistics represent a large opportunity-loss and its significant growth ambitions are a competitive risk for incumbent Parcel companies,” Morgan Stanley analysts wrote.

Amazon is expected to move more packages than FedEx and UPS in just a few years

Morgan Stanley estimated that Amazon would move 2.1 billion packages in 2019, while FedEx’s volume would total 3 billion and UPS’s would be 4.7 billion.

That’s set to boom by 2022, when Amazon is expected to increase its package volume to 6.4 billion, the report said. The e-commerce giant could deliver more than FedEx by 2020 and more than UPS by 2022.

amazon trucks

Amazon recently bought branded tractors to match its branded trailers — another move suggesting the retailer’s transportation might.
George Frey/Getty Images

The US Postal Service had no comment on the research. FedEx did not provide a comment. Representatives from Amazon did not respond to a request for comment.

A representative from UPS said that “Amazon and UPS are in a mutually beneficial relationship, but there is more to e-commerce, and UPS is leaning into it.”

“UPS has a diverse customer base and supports 90% of the largest retailers and thousands of small and medium-sized businesses,” he added. “The largest e-commerce shippers are beginning to move from two-day to one-day delivery.”

(The report assumed that Amazon’s US package growth would explode at a 68% compound annual growth rate — perhaps an audacious estimate compared with UPS’s and FedEx’s estimated rates of 3.2% and 4.5%. UPS, for instance, had double-digit air volume increases in the past two quarters.)

But it doesn’t stop at moving Amazon’s packages. Morgan Stanley said Amazon would start to integrate non-Amazon packages into its network, which would complicate UPS’s and FedEx’s messaging around their growth in e-commerce. Even if the two companies were to rely less (or, in FedEx’s case, not at all) on Amazon, they wouldn’t be able to argue that they are growing their networks by incorporating other e-commerce customers.

As the analysts wrote (emphasis ours):

“We believe Amazon Logistics may have enough ‘spare’ capacity by 2022 to move as many as 3.5 billion non-Amazon packages or roughly 35% of the non-Amazon e-commerce market. This could cut UPS/FedEx/USPS share of e-commerce packages in the US from 95%+ in 2014 and 82% in 2019 to 50-55% by 2022-25.

“Even if we assume that Amazon Logistics only moved ~1.5 billion third-party (3P) packages in 2022, we see this adding $7 billion to 2022 base case Amazon revenue (+1.5% to total revenues) and ~$1bn (3%) to EBIT due to efficiency/volume savings.”

A $100 billion worry

All told, if Amazon were to move 6.5 billion more of its own packages by 2022, that would slash up to $65 billion in lost annual revenue for UPS and the USPS. That would tick up to $100 billion if Amazon also moved 3.5 billion non-Amazon parcels that FedEx, UPS, and the USPS would otherwise move.

Morgan Stanley estimated that Amazon pays $10 per parcel, an average of the UPS, FedEx, USPS revenue per unit. However, Amazon likely pays about half that, so the actual lost revenue for UPS and the USPS could total closer to $33 billion, the report said.

But even using conservative estimates, Morgan Stanley said that 15% of non-Amazon e-commerce packages is a $7 billion opportunity and that injecting them into the giant’s network could add $1 billion in earnings before interest and taxes to Amazon.

amazon shipping cost vs sales growth

The need for Amazon to control its shipping costs is serious. But the payoff of more investment in logistics may be significant for the company.
SEC filings; Andy Kiersz/Business Insider

The company is aware of the massive revenue potential and actively investing in it. Amazon is set to spend more than $3 billion on developing its one-day delivery network, Youssef Squali, the managing director and global head of internet and media-equity research at SunTrust, said earlier this year.

Dave Clark, Amazon’s senior vice president of North America operations, said in a recent all-hands meeting that Amazon’s transportation would be “pretty radically different” from typical parcel carriers.

“I really think the next three to five years is all about what’s going to happen in our transportation businesses,” Clark said, according to audio obtained by Business Insider’s Eugene Kim. “And we’re starting to see our first implementations of robotic sort centers, package sortation centers, air hubs, delivery stations starting to deploy this year. And it will begin to scale in 2020 and 2021.”

Real Life. Real News. Real Voices

Help us tell more of the stories that matter

Become a founding member

Do you work for Amazon? What do you think about its quest to take over transportation? Email

Subscribe to the newsletter news

We hate SPAM and promise to keep your email address safe

Click to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Top stories


To Top
%d bloggers like this: