I think this might also interesting. Muzzy June 3 (Reuters) - Shares of FDX Corp., parent of Federal Express, fell more than 4 percent Thursday after air express competitor Airborne Freight Corp. ABF said it was joining the U.S. Postal Service in a pact to deliver non-express packages to consumers.
But analysts were not sure how much impact the agreement would have on Memphis, Tenn.-based FedEx, because the world's largest air express shipping company has been more focused on the higher-margin business-to-business end of the electronic commerce market.
"It's a segment of the business FedEx doesn't want to be in, but it's also a segment of the business they're in," Helane Becker, analyst at Buckingham Research, said in a news release.
FDX has announced a plan for its RPS Inc. unit to begin a limited test of residentially delivery service this summer.
But the FedEx express business is geared more to higher value items that customers are willing to pay a premium to have delivered overnight, rather than lower cost items customers will wait for, analysts said.
"When you're looking at business-to-residential type business, there is a ratio of cost of shipment to cost of goods," John Pincavage, analyst at Warburg Dillon Read said. As an example, a consumer is not likely to pay extra to have a $25 book shipped overnight from Amazon.com, he said.
The move by Airborne and the Postal Service is more likely to effect Atlanta-based United Parcel Services of America Inc., which has long been dominant in the residential package shipping business.
"This product is more aimed at UPS ground (service) than anything else," Becker said.
Analysts said that delivery companies were in the process of positioning for a boom an expected boom in electronic commerce, rather than meeting a need that is already there.
"If the people predicting the growth of e-commerce are even close to being right, there's going to be enough business for everybody," Pincavage said.
FDX shares were down 3 at 51-3/4 Thursday.
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