A year of weak package demand didn’t stop Amazon’s logistics network from further expanding its market share.
The e-commerce giant’s shipping business surpassed UPS’s package volume for the first time in 2023, according to the Pitney Bowes Parcel Shipping Index. The Pitney Bowes Parcel Shipping Index measures the volume and expenditure of packages weighing up to 70 pounds.
Total U.S. parcel volume increased 0.5% from 21.5 billion in 2022 to 21.7 billion in 2023, and revenue decreased 0.3% to $197.9 billion, the first decline in parcel sales in seven years.
The index said Amazon now has a 27% market share in parcel deliveries after total volume increased 15.7% to 5.9 billion packages. The technology giant captured 23% of the market last year, less than the 24% held by UPS.
Although the United States Postal Service (USPS) had the highest package volume, its 6.6 billion packages were still down about 1% from last year and accounted for 31% of the market share, according to the index.
Through 2023, UPS and FedEx volumes declined by 10.3 percent and 6.1 percent, respectively, according to Pitney Bowes calculations. UPS currently has a 21% market share with 4.6 billion packages, while FedEx has an 18% market share with 3.9 billion packages.
“Amazon will leapfrog USPS” [in volume] That’s not surprising, but I think the more important issue comes down to revenue (and ultimately profit),” said Jason Miller, interim dean of the School of Supply Chain Management at Michigan State University’s Eli Broad College of Business. he said. “UPS and FedEx are more focused on yield than on market share growth (this is reflected in the much higher average prices they charge).”
According to the Pitney Bowes Index, UPS and FedEx remain the top players by revenue, even as Amazon focuses on increasing sales volume. Amazon Logistics is calculated to have captured 14% of the market share based on revenue in 2023, but still has a long way to go to reach the levels of UPS (35%) and FedEx (32%).
The good news for brands and retailers is that regardless of the option, capacity levels across logistics can be accelerated, according to Satish Jindel, president of SJ Consulting Group.
“Shippers need to know that the parcel market is in a state it hasn’t been in 40 years,” said Rodway Packaging Systems, which was acquired by FedEx and rebranded as FedEx Ground in 2000. said Zindel, a founding member of. The processing capacity of parcels is 125 million pieces per day, and the demand is 80 million pieces. what does it do? This means shippers have more influence over controlling pricing. ”
Zindel cited USPS data showing the agency’s package processing capacity will reach 70 million packages before the 2023 holiday season. He said couriers have reduced their ability to do so starting in 2020 amid concerns ahead of that year’s presidential election, as more consumers mailed their ballots due to the coronavirus disease (Covid-19) pandemic. He pointed out that the number has more than doubled.
In 2023, the four largest carriers will share more of the market with smaller competitors, as the total volume of “other” carriers increases by 28.5% to approximately 640 million units. Did. These companies’ revenue increased 32.5% to $5.6 billion in 2023.
“My sense is that, like most markets with long-term growth, as the market expands it will allow for the entry of more competitors targeting niche customers,” Miller said. told Sourcing Journal. “This tends to be the case in most industries where there are a few large generalist companies, followed by a secondary presence of smaller companies that serve more specific market needs.”
Zindel had contrasting opinions about adding new last-mile delivery players.
“It’s not a good time to be in business when the market is saturated with capacity,” he said.
Zindel said Amazon should now have an internal route to gain further traction in the logistics space, as it already has a B2C business model that complements its ability to pick up and deliver goods from other third-party companies. Ta.
“They can do it very effectively as an operation, but they struggle with the technology,” Zindel said. “Other shippers rely on third parties to do a lot of the technical and IT work to enable them to manage shipping, billing, and service to their customers. Amazon understands that and makes it possible. I’m having a hard time doing that.”
Pitney Bowes predicts that total U.S. package volume will reach 23 billion to 35 billion pieces by 2029, driving a 5% compound annual growth rate (CAGR) from 2024 to 2029.290 It cited the “most likely scenario” of 100 million packages. .
Zindel doesn’t expect parcel demand to increase significantly beyond the usual 4-5% growth until at least 2024.
“What will increase demand?” Zindel asked. “People are spending too much and don’t have a lot of extra money to spend. And what they have, they spend on services and entertainment.”
