Rapid growth in Amazon’s own logistics business could knock up to $100 billion off the revenues of current logistics partners, a report has said.
Investment firm Morgan Stanley estimated in an investor note that Amazon Logistics would ship 6.5 billion packages for the online retailer in 2022. Assuming a price of $10 per parcel, it predicted that this could mean UPS, FedEx and USPS losing $65 billion in annual revenues.
The firm also believed that Amazon opening its logistics business up to third parties as a service could lead to another $35 billion of lost annual revenue.
“Simply put, the already large and quick ramp of AMZNL (Amazon Logistics) represent a large opportunity loss and its significant growth ambitions are a competitive risk for incumbent Parcel companies.”
According to the report, Amazon was already shipping around 46% of its own packages as of August compared to only 17% a year earlier. UPS has been the biggest loser from the growth of Amazon Logistics, losing 13% of volumes compared to FedEx’s 11% and USPS’s 7%.
Morgan Stanley estimated Amazon Logistics would ship 2 billion packages in the US in 2019.
The report also found that Amazon Logistics disproportionately focused on densely populated suburban areas, with 61% of volumes coming from there compared to 27% in urban areas and 11% from rural areas.
FedEx allowed its contract with Amazon for US express delivery services to expire on 30 June. The decision does not affect contracts outside the US in other countries or for international services.
Last year Morgan Stanley analyst Ravi Shanker claimed that Amazon’s air freight business could sap revenue from FedEx and UPS, which currently handle up to 50% of Amazon’s package volumes.
In an investor note, Shanker claimed Amazon Air could mean 2% of lost revenue for UPS and FedEx in 2018, rising to 10% in 2025.
“For now, investors are focusing on Amazon’s last-mile efforts but we believe the challenge in Air is just as relevant,” he wrote.
