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Amazon strikes a blow in the logistics industry



<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "For many years rumors have been built by Amazon .com s (NASDAQ: AMZN) Intentions in logistics and delivery The company has added fulfillment and logistics services to its list of competitors in its 10-K and has revealed a program called Amazon Shipping where the company collects and delivers other shipping packages. In the later earnings talks, CFO Brian Olsavsky has also started talking more about the company's ambitions in logistics. "data-reactid =" 11 "> For years has rumors built up Amazon.com s (NASDAQ: AMZN) intentions in logistics and delivery. The company has added fulfillment and logistics services to its list of competitors in its 10-K report, and has revealed a program called Amazon Shipping, where the company picks up and delivers other shipping packages. In the latest earnings talks, CFO Brian Olsavsky has also started talking more about the company's ambitions in logistics.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt) – sm" type = "text" content = "However, the clearest sign of Amazon's potential influence in the industry came from the recent earnings report from XPO Logistics (NYSE: XPO) one of the largest global suppliers of freight and logistics services and the leader in cargo delivery of heavy goods such as furniture and appliances. The guide owed the "impact of our largest customer significantly scaling down its business portfolio," according to CEO Brad Jacobs, Jacobs continued explaining the earnings call that the XPO would lose $ 600 million in annual activity from that customer, which reduced business by two-thirds. & nbsp; "data-reactid =" 12 "> However, the clearest sign of Amazon's potential industry impact comes from the latest earnings reports n from XPO Logistics (NYSE: XPO) one of the world's largest global suppliers of freight and logistics services and a leader in the delivery of heavy goods such as furniture and appliances. In the fourth quarterly report, XPO deleted its 2019 guidance significantly, and the shares fell by two digits on the report. The culprit was "the impact of our largest customer significantly scaling down their business portfolio," according to CEO Brad Jacobs. Jacobs continued to explain on the earnings call that XPO would lose $ 600 million in annual activity from this customer, which reduced its business by two-thirds.

Although Jacobs did not mention the customer, it was thought to be Amazon. Jacobs explained that the business his company lost was post-injection, or bringing trucks of parcels in high volume to the post office. He also explained that post-injection has low entry barriers, and is therefore not as protected as the company's business makes cargo delivery of heavy goods.

<p class = "canvas-textile-textile Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The news also weighted FedEx (NYSE: FDX) and UPS UPS ] (NYSE: UPS) which were 2.9% and 1.3%, respectively, both FedEx and UPS attempted to shut down Amazon threat said that it would take billions of dollars in investment for Amazon to start competing with them, but as XPO's slideshows, it doesn't take much to torpedo a stock price. "data-reactid =" 14 "> The news also weighted FedEx (NYSE: FDX) and UPS (NYSE: UPS) which were down 2.9% and 1.3%, respectively. Both FedEx and UPS have attempted to downplay the threat from Amazon, saying it would take billions of dollars in investment for Amazon to start competing with them. But like XPO's slideshows, it doesn't take much to torpedo a stock price.

An Amazon branded "Prime Air" jet in a fly hangar.

Image Source: Amazon.

<h2 class = "learn-text-text-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " A multi-trillion-dollar Opportunity "data-reactid =" 27 "> An opportunity for multi-trillion dollars

According to Transparency Market Research, the global logistics market is expected to reach $ 15.5 trillion by 2023. While Amazon obviously does not target it The whole market, it is not surprising that the company is in an industry that is both large and directly linked to its e-commerce business 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 [1 9459030] Wall Street Journal & nbsp; (subscription required) describe how Amazon is attempting to sign FedEx and UPS by avoiding difficult fuel fees and other such charges. The ecommerce giant is now using its own logistics service to deliver around 26% of their own orders, according to Wolfe Research, which shows that it has already built a significant logistics business, as the company controls about half of e-commerce sales in the United States, both through its own retail and third-party marketplace. is one of the largest for FedEx and UPS, so its initiatives threaten not only to remove a valuable customer from the freight giants, but also to put pressure on the prices in the industry that Amazon has made a habit of in other sectors. Amazon's claims, FedEx recently released a statement stating that e-commerce giant represents only 1.3% of its business. & Nbsp; & nbsp; "data-reactid =" 29 "> A recent article in the Wall Street Journal (subscription required) details of how Amazon is attempting to sign FedEx and UPS by avoiding harmful fuel taxes and other such fees. now its own logistics service to deliver about 26% of its own orders, according to Wolfe Research, which shows that it has already built a significant logistics business, as the company controls about half of e-commerce sales in the US, both through its own retail and Third Party Marketplace Amazon is the US Post's largest customer and is one of the largest for FedEx and UPS, so its initiatives not only threaten to take away a valuable customer from the shipping giants, but also put pressure on industry prices as Amazon has Accustomed to other sectors. Deflect concerns about Amazon, FedEx recently released a statement saying e-commerce giant accounts for only 1.3% of its business.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "On Amazon's latest earnings call explained Olsavsky the opportunity Amazon saw and said: "data-reactid =" 34 "> On Amazon's last earnings call, Olsavsky explained the possibility Amazon looked and said:

What we Like If our ability to participate in transportation is many times we can Do it at the same cost or better, and we also enjoy the cost profile of it. We can also invest selectively because we have more perfect information. We know where our demand is, we know where we move things between department stores and sorting centers. And by not involving third parties all the time, we found that we can extend our order interruptions and we have done so in recent years.

Olsavsky touches huge amounts of data that Amazon uses to inform his own delivery service and tailors it to his own needs.

That way, the growing Amazon Shipping business looks like Amazon Web Services (AWS), the company's cloud computing juggernaut, which it originally developed as an internal project to earn its own e-commerce needs, but is now the largest corporate cloud industry in the US by adoption. AWS had an operating profit of $ 7.3 billion in 2018.

While Amazon is facing anchored logistics competition, it can very much follow the same path it did with AWS, as the company can take the lessons and data from delivering logistics and delivery services for themselves and use that knowledge to serve their customers. Amazon has shown countless times before it is unnoticed to challenge industry leaders, even in areas where it has no prior experience.

The XPO shares closed down on Friday at 12.6%. This will probably not be the last time a logistics provider owes its woes to Amazon.

<p class = "canvas-atom lerrettekst Mb (1.0em) Mb (0) – sm Mt (0.8em) – -19" <p class = "canvas-atom lerrettekst Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm "type =" text "content =" John Mackey, CEO of Whole Foods Market, a subsidiary of the Amazon, is a member of The Motley Fools Board. Jeremy Bowman owns shares in Amazon and XPO Logistics, Motley Fool owns and recommends Amazon and FedEx, Motley Fool recommends XPO Logistics, Motley Fool has a disclosure policy . = "49"> John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fools Board. Jeremy Bowman owns shares in Amazon and XPO Logistics. Motley Fool owns and recommends Amazon and FedEx. Motley Fool recommends XPO Logistics. Motley Fool has a disclosure policy.


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