Views: 47 Author: Site Editor Publish Time: 2023-01-16 Origin: Site
FedEx, Amazon, and UPS are trying different ways to preserve profit margins in their parcel businesses.
· FedEx is further scaling back its Sunday delivery campaign,
· Amazon is trying to increase the performance of its own logistics by attracting other e-commerce companies.
· UPS is eyeing customers' wallets by expanding surcharges for residential deliveries.
The company will significantly reduce its coverage of the U.S. market starting in mid-March, according to a contractor memo for FedEx Ground, which makes the actual deliveries.
This is the second time that FedEx has moved its "Sunday Delivery Program" to gain an advantage in the market competition. With losses much higher than expected, FedEx management scaled back U.S. population coverage from 95% to about 80% in the summer of 2022. The new round of plans will bring coverage down to about 50%.
Basically, Sunday deliveries will be reduced to only urban markets. FedEx announced that it will primarily serve "areas with high population density and high-demand customers."
FedEx is targeting $3.7 billion in savings in fiscal 2023.
Amazon is trying to boost volumes on its third-party package fulfillment network. Amazon has announced that it will open the Buy with Prime service to all merchants in the United States before January 31. The service allows online merchants outside its platform to use Amazon's payment and logistics.
It is understood that in April 2022, Amazon will allow this operation in a small amount through an invitation system. Now, Amazon is opening it up to all sellers and enjoying everything they’ve come to expect from Amazon, including fast, free shipping, a seamless checkout experience, and free returns on eligible orders. And they don't need to sell directly through Amazon.
Amazon also struck a deal with e-commerce platform BigCommerce to allow merchants using the platform to use Amazon's fulfillment services.
Faced with skyrocketing logistics costs and a slowing e-commerce business, Amazon is looking to improve its network utilization. Amazon's U.S. market share fell last year for the first time, according to research firm Insider Intelligence. Meanwhile, its Prime subscriptions appear to have stagnated.
Amazon has increasingly made its logistics facilities available to third parties for better utilization of assets. The most recent move is its effort to sell excess capacity on its cargo planes. Its cargo fleet has grown to about 100 planes, a costly endeavor made by slowing traffic and rising operating costs.
In the first half of 2022, Amazon's logistics spending is 42% higher than in the first half of 2020. And, after acknowledging that it had excess warehouse capacity, the company made space in its warehouses available to third parties last year to save money.
UPS is also eyeing its customers' wallets to preserve its profit margins. UPS has announced that it will extend the residential delivery surcharge through mid-January. It has removed the word "peak" from its menu of surcharges, and the description now reads "demand surcharge".
"The surcharge helps and ensures that UPS is properly compensated for maintaining our high quality of service against the backdrop of dynamic market conditions," UPS said.
Obviously, after the crazy expansion of online shopping driven by the rapid growth of e-commerce, each company is now transforming into an operation that focuses on controlling costs and trying to maintain profit margins.
