FedEx, UPS & DHL Compete for Global Market Share in Shipping and Logistics

The parcel delivery business is one of the most competitive in the world, with a small handful of companies battling for market share. Competition escalated when firms with leading niche positions began to branch out into adjacent services. Many years ago in the U.S., for example, United Parcel Service (UPS) ruled supreme in ground delivery services, while FedEx was the undisputed leader in express air package delivery. But when UPS began offering overnight air services and FedEx started its ground delivery business, the battle for market share commenced in earnest. In addition, both companies now have thousands of retail locations to serve as package drops, boxing and printing stations. Moreover, UPS and FedEx both began offering logistics services to ease supply chain problems, and they introduced sophisticated web sites for customers who want online package tracking, labeling, billing and pickup scheduling.

In the international market, competition among package delivery providers is even more fierce. Outside domestic borders, UPS and FedEx are confronted with a number of leading foreign companies, first and foremost being DHL Worldwide Express, which is owned by German company Deutsche Post AG.

The stiff competition in the global delivery industry has had its rewards. Rival companies have pushed each other to new heights of efficiency and reliability. Cutting-edge technology, improved communication, and streamlined transport planning have become standards. Both UPS and FedEx have made massive improvements in their service offerings in the last few years alone. Each has an annual IT budget of over $1.5 billion. Both offer customers the ability to track packages online as they travel, a key element in supply chain logistics.

The big couriers (FedEx, UPS and DHL) continue to get rapidly growing volume from consumers who shop online. Amazon, in particular, is coming up with new strategies to make it easier for consumers to receive their packages, even when they are not at home.

Amazon maintains banks of lockers in retailers such as grocery, convenience and drug stores in urban areas. This includes lockers in Whole Foods stores, which Amazon owns. Amazon packages can be placed in these special lockers by couriers, so that customers can pick up packages themselves later using access codes received by email, instead of trying to be at home to meet delivery by UPS or FedEx. (Many of these lockers can also be used for returns.) Deutsche Post DHL has offered a free locker service in Germany for years.

Amazon has established its own network to provide significant logistics services and handle more of its own long-distance shipping in Amazon-owned or Amazon-leased equipment, including large numbers of Amazon aircraft and trucks. The company already offers services called “Fulfillment by Amazon” that provides services such as warehousing, packing and shipment forwarding for merchants that sell products on the Amazon e-commerce platform. A related service called Dragon Boat expanded into a global delivery network to handle the supply chain of goods from Indian and Chinese factories through Amazon facilities to end-customers. By 2022, Amazon already had more than 175 fulfillment centers worldwide (with more than 150 million square feet of space).

Meanwhile, another program called Amazon Flex is based on the Uber work-on-demand model. Flex drivers deliver packages to Amazon Prime customers (who pay an annual fee for perks such as free shipping and numbered more than 200 million members worldwide as of early 2022) during peak periods such as the holiday season, or prior to major storms when people need to stock up on food items. Amazon Flex is in addition to the company’s Prime Now service, available in major cities worldwide, which uses independent delivery people to send same-day orders via car, bike or public transportation.

The e-commerce giant quietly launched Global Supply Chain by Amazon in 2016. Today, this Amazon business unit operates dozens of Boeing 767s and thousands of truck trailers. As a vertically integrated firm keen on cutting costs and creating efficiencies, Amazon has long been willing to invest in or develop its own internal resources for a wide variety of its needs. This strategy led Amazon to become one of the world’s leading cloud computing services providers, and could conceivably lead to it becoming a world leader in shipping, delivery or logistics services. Amazon’s ability to innovate and its willingness to make bold investments make it extremely capable in this regard.

In 2018, the company launched its Amazon Shipping service. Eventually, Amazon Shipping may be offered to a wide variety of shippers, such as merchants that participate in the Amazon Marketplace. If so, this ecommerce giant faces stiff competition from FedEx and UPS.

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