December is a critical month for UPS and FedEx as the two giants go head to head delivering packages. And while home delivery is great for consumers, turns out that the booming market is “relatively unprofitable” for industry, according to Fortune.
Home drop-offs typically involve just one or two items; in contrast, businesses ship to one another in bulk, reducing cost per delivery. And there’s always someone waiting for shipments at a warehouse or corporate HQ. Not so for residential customers, where a homeowner out walking the dog could force a driver to make multiple, profit-shrinking trips.
And then there’s this element, which looms for both delivery giants:
FedEx and UPS are also keeping a wary eye on one of their cash cows. Amazon made waves recently by testing its own delivery service to ease warehouse backlogs; both delivery companies’ stocks dropped in early October on that news. Analysts say the e-commerce giant doesn’t represent a short-term threat. But whether Amazon remains a partner or becomes a competitor, UPS and FedEx will have to grow ever more efficient to keep customers and investors happy.
This is an industry watch.