Stratford, CT – The parcel industry was already facing unprecedented disruption before COVID hit, which appears to have compressed three years of growth and disruption into a six-month period. The key question shippers are asking is, "Where do we go from here?" Ravi Shanker, Executive Director at Morgan Stanley, took “virtual” center stage at the end of October to share insights on the carriers from Wall Street’s perspective.
eCommerce Volumes Up Over 40% YOY
With parcel volumes surpassing 100 billion worldwide and carriers such as UPS, FedEx and USPS dealing with capacity issues, the need for shippers to understand what their options are have never been more important especially heading into the holiday season. “We have seen an enormous surge in eCommerce demand and eCommerce volume as a result of the pandemic. In 2020, Morgan Stanley’s Internet team expects eCommerce volumes to be up over 40% YOY coming off a mid-teens steady growth rate over the past 4 years,” explained Shanker. Additionally, he noted that the “bring-forward” levels of 40% eCommerce due to the pandemic will probably drop back down to the high single digits over the next two to three years as things start to normalize and in-store shopping comes back.
UPS and FedEx Running at Peak Season Volumes Already
Typically, the major carriers see a 20%-30% volume increase during peak holiday season. Shanker indicated that we do not yet know whether peak season volumes are already built-in to current volumes or carriers will see more demand as we approach the holiday season. “Most retailers are trying to drag out peak season and make it more of a season than just a couple of days,” said Shanker. “The other approach the parcel companies have taken is to significantly increase their surcharges to try and make sure shippers manage their volume load,” Shanker continued.
Amazon Logistics Will Probably Be the Same Size as FedEx This Year and UPS in 2022 within the US
Aside from the Big 3, Shanker shared his thoughts on Amazon and its foray into the delivery side of the business as well as the role regional carriers can play going forward. “The world is a different place and probably very few other industries have seen the impact brought on by the pandemic as much as the parcel industry,” explains Shanker. He pointed to Amazon Logistics and the fact they will be roughly the same size as FedEx in the US by 2020 and UPS by 2022. “In December of last year, we estimated that by the end of last year, Amazon was moving about half its own packages in-house. That was double a year before that and we’ve already seen a bunch of industry reports pointing to Amazon moving about two-thirds of its own volume in-house by July/August of this year,” he continued. He also discussed the role of the United States Postal Service and noted that they are still the most cost-effective delivery option for rural areas and have the largest delivery network in the country.
You can access the entire virtual session on-demand by clicking here.
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