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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "However, the clearest sign of the Amazon's potential impact in the industry came from the recent report on the profits of XPO Logistics (NYSE: XPO), one of the world's largest suppliers of freight and logistics services and the leader in the delivery of heavy goods such as furniture and appliances over the last mile. In its fourth quarter report, XPO significantly reduced its guidance for 2019 and its shares dropped to double digits. The culprit was "the impact of our biggest client on substantially reducing its business portfolio," said CEO Brad Jacobs. Jacobs went on to explain on the call for results that XPO would lose $ 600 million in annual business revenue from this customer, which was reducing its sales by two-thirds. & Nbsp; & nbsp; "data-reactid =" 12 "> However, the clearest sign so far of Amazon's potential impact on the sector comes from the recent report on the results of XPO Logistics (NYSE: XPO), one of the world's largest suppliers of freight and logistics services and the leader in the delivery of heavy goods such as furniture and appliances over the last mile. In its fourth quarter report, XPO significantly reduced its guidance for 2019 and its shares dropped to double digits. The culprit was "the impact of our biggest client on substantially reducing its business portfolio," said CEO Brad Jacobs. Jacobs went on to explain, in the call for results, that XPO would lose $ 600 million in business per year from this customer, which was reducing its business by two-thirds.
Although Jacobs did not name the client, he was generally supposed to be Amazon. Jacobs explained that the company that his company had lost was the postal injection or the transport of large parcel parcels to the post office. He also explained that the postal injection presents few barriers to entry and that it is therefore not as protected as the company that makes the delivery of heavy goods on the last mile.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The news also weighed FedEx (NYSE: FDX) and UPS (NYSE: UPS), down 2.9% and 1.3%, respectively. FedEx and UPS have both sought to downplay Amazon's threat, saying it would take billions of dollars in investment for Amazon to start competing with them. However, as shown on the XPO slide, it does not take much to torpedo a stock price. "Data-reactid =" 14 "> The news also weighed FedEx (NYSE: FDX) and UPS (NYSE: UPS), down 2.9% and 1.3%, respectively. FedEx and UPS have both sought to downplay Amazon's threat, saying it would take billions of dollars in investment for Amazon to start competing with them. However, as the XPO slides show, it does not take much to torpedo a stock price.
A "Prime Air" jet from Amazon brand in an airplane hangar.
Source of the image: Amazon.
<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A multi-billion dollar opportunity"data-reactid =" 27 ">A multi-billion dollar opportunity
According to Transparency Market Research, the global logistics market is expected to reach $ 15.5 trillion by 2023. While Amazon clearly does not target this entire market, it is not surprising that the company relies on a sector with times huge and directly connected. e-commerce, as extending to shipping would essentially represent vertical integration.
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A recent article in The Wall Street Journal& nbsp; (subscription required) details Amazon's efforts to outsource FedEx and UPS, avoiding fuel surcharges and other such fees. The e-commerce giant also uses its own logistics department to deliver about 26% of its own orders, according to Wolfe Research, which shows that it has already built a significant logistics business, with the company controlling approximately half of e-commerce sales in the United States, both through its own retail network as well as through its third-party market. Amazon is the largest customer of the US Postal Service and one of the largest for FedEx and UPS. Therefore, his initiatives threaten not only to remove a valuable customer from the giants of the expedition, but also to put pressure on industry prices, as has made Amazon a habit of in others sectors. To dispel concerns about Amazon, FedEx recently issued a statement that the e-commerce giant accounted for only 1.3 percent of its business. & Nbsp; & nbsp; "data-reactid =" 29 "> A recent article from The Wall Street Journal (subscription required) explains in detail how Amazon is trying to reduce FedEx and UPS prices by avoiding fuel surcharges and similar costs. The e-commerce giant also uses its own logistics department to deliver about 26% of its own orders, according to Wolfe Research, which shows that it has already built a significant logistics business, with the company controlling approximately half of e-commerce sales in the United States, both through its own retail network as well as through its third-party market. Amazon is the largest customer of the US Postal Service and one of the largest for FedEx and UPS. Therefore, his initiatives threaten not only to remove a valuable customer from the giants of the expedition, but also to put pressure on industry prices, as has made Amazon a habit of in others sectors. To dispel concerns about Amazon, FedEx recently issued a statement that the e-commerce giant accounted for only 1.3 percent of its business.
What we like about our ability to participate in transportation is that often we can do it at the same cost or better, and we also appreciate the cost profile. We can also invest selectively because we have more perfect information. We know where our demand is, we know where we transport things between warehouses and sorting centers. And by not using third parties all the time, we found that we could extend our orders and we have done so in recent years.
Olsavsky evokes the huge amounts of data that Amazon uses to inform its own delivery service and adapt it to its own needs.
In many ways, Amazon Shipping's booming industry appears to resemble Amazon Web Services (AWS), the company's cloud computing giant, which it originally developed as an internal project. to meet its own e-commerce needs, but which is now the largest company. cloud in the United States by adoption. AWS achieved operating profit of $ 7.3 billion in 2018.
If Amazon faces stiff competition in the logistics field, it could very well follow the same path as AWS, as it can draw lessons and data from the provision of logistics and delivery services for itself and apply that knowledge to serve its customers. Amazon has already proven time and time again that he was not afraid to challenge industry leaders even in areas where he had no experience.
XPO shares ended Friday down 12.6%. This will probably not be the last time a logistics service provider blames Amazon for its problems.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 41 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Jeremy Bowman holds shares in Amazon and XPO Logistics. The Motley Fool owns shares and recommends Amazon and FedEx. The Motley Fool recommends XPO Logistics. The Motley Fool has a disclosure policy."data-reactid =" 49 ">John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Jeremy Bowman owns shares in Amazon and XPO Logistics. The Motley Fool owns shares and recommends Amazon and FedEx. The Motley Fool recommends XPO Logistics. Motley Fool has a disclosure policy.
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