Amazon overtakes UPS and FedEx to become biggest delivery giant in the U.S.
Nov. 28, 2023 7:28 AM ET
Amazon.com, Inc. (AMZN), UPS, FDX, WMT, TGT
By: Yoel Minkoff, SA News Editor

Resilient consumers have not only helped the American economy rebound with a vengeance, but they've also shaped the winners and losers of the sprawling U.S. logistics industry. New internal data from Amazon (NASDAQ:AMZN) reportedly shows the e-commerce behemoth set to take hold of the annual delivery crown for the first time, shipping a total of 4.8B packages in the U.S. before Black Friday and Cyber Monday, and predicting it will deliver about 5.9B by the end of 2023. Its closest rival UPS (NYSE:UPS) only handled around 3.4B parcels domestically in the first nine months of the year, and said its volume in 2023 is unlikely to exceed last year's 5.3B. FedEx's (NYSE:FDX) domestic parcel volume is even further behind, and both companies even include packages they hand off to the U.S. Postal Service for final delivery.

Flashback: It wasn't long ago that logistics leaders thought the idea of a serious Amazon (AMZN) competitor was a pipe dream. In 2016, FedEx (FDX) CEO Fred Smith even called such an idea "fantastical," saying concerns about industry disruption were overblown. "In all likelihood, the primary deliverers of e-commerce shipments for the foreseeable future will be UPS, the U.S. Postal Service and FedEx," he declared in a conference call with analysts.

Three years later, in 2019, FedEx (FDX) and Amazon (AMZN) went through a very public divorce as the latter continued to scale its business and invest in its own delivery service. Amazon (AMZN) still works with UPS (UPS), but it only constitutes a minority of its operations, or about 11% of revenue. Helping Amazon (AMZN) take the lead were a number of innovations including flex drivers, same-day delivery centers, warehouse robots, and more recently, AI. Walmart (NYSE:WMT) and Target (NYSE:TGT) are also speeding up deliveries by fulfilling orders closer to customers, but with its store-less format, Amazon (AMZN) has been nimble and still remains the clear industry leader.

Outlook: While Amazon (AMZN) has shown its power in residential delivery, its core strength is anchored in one-way operations and its existing network. That may already be changing as it expands its global reach and leverages other providers to deliver the same level of service or things like pick-up returns. "Earlier fears of big cancellation in Prime membership due to price hikes have been proved wrong," SA analyst Bluesea Research noted in Amazon: Fear Of Saturated Market Is Overhyped. "Amazon's subscription business is showing steady growth and the launch of new services also increases the growth runway for the subscription business."