December 21, 2022
As an individual investor, have you ever wondered about the companies responsible for getting the billions of packages and gifts sent during the season from the retailer to their final destination? With the holiday season in full swing, many retail shareholders are slowing down to enjoy time with family and friends. At the same time, these companies are scrambling to get that perfect gift you picked out to your far-away loved one. As the rest of the world slows, they speed up.
Though you can’t invest in the U.S. Postal Service (though you do if you are a taxpayer), its motto is fitting, especially at this time of the year when winter winds bring stormy weather to much of the nation: “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”
The same is true for the publicly traded companies that work tirelessly to get our gifts and packages to their destinations on time and in good shape.
Shipping companies like UPS (Tii:UPS) and FedEx (Tii:FDX) have struggled recently as they try to balance the need to handle the ShipMatrix forecast of 90 million packages a day with slowing demand for shipping as customers return – at least partially – to in-person shopping as COVID subsides.
UPS has hired 100,000 season workers and FedEx reported that it is prepared for the holidays even after cost cutting this fall that the company attributed to a major decline in consumer demand.
Still, more than 3 billion packages are shipped during the holiday season. For the first time in several years, shippers appear to have enough capacity for demand after several difficult years during COVID when the system couldn’t handle the number of packages coming through the system and supply chain issues strangled logistics around the globe.
The traditional shipping companies have been joined by Amazon (Tii:AMZN), which now operates Amazon Logistics, its own delivery service. According to data from Pitney Bowes (Tii:PBI), a technology company focused on shipping and postage, Amazon is now one of the largest shippers in the world. In 2020, according to Modern Retail, Amazon Logistics delivered 4.2 billion parcel shipments, up from 1.9 billion in 2019. It now makes up, by volume, 21% of the parcel shipments in the U.S., behind the USPS (38%) and UPS (24%) but ahead of FedEx for the first time (16%).
Other shippers that retailer investors can explore include DHL (Tii:DPSGY), CH Robinson Worldwide (Tii:CHRW) and Expeditors International (Tii:EXPD), to name a few, though for most consumers, the shipping world is dominated by the USPS, UPS, FedEx and Amazon.
Getting your package from a store to the consumer is a lot more complicated than the average shopper understands. Let’s take a typical package heading through UPS:
Once the order is placed, the package might travel by truck and/or plane to a shipping hub, like the huge UPS Super Hub in Atlanta, a facility that spans 1.2 million square feet – about the size of 19 football fields. The facility can handle more than 100,000 packages per hour – 1,700 per minute. It has 18 miles of conveyer belts that shuttle the packages around the facility using smart labels that are scanned by six-sided scanners. The information on the label tells the system where to direct the package so it can be reloaded on a truck to go to its destination.
Most of the holiday package glut will go through the USPS, which delivers about 900 million parcels between Thanksgiving and New Year’s Day, in addition to 15 billion other pieces of mail, but all the major public and private shippers add staff to handle holiday packages.
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