The Value of FedEx and UPS
The United States Postal Service issued a warning last week that it could declare bankruptcy due to its declining revenues and rising costs. The rising costs of USPS are primarily due to employee compensation which can be attributed to 80% of its operating costs which differs from the 30% employee costs of both FedEx and UPS. It seems that the private mail carriers have better operations. This may be true, but the real value of FedEx and UPS will be their future earnings relating an increase in goods purchased over the internet. Internet purchases will increase as the household income of the millenials increases. Retail sales will rely less on the baby boomers who are no too savvy with computers, but still contribute a majority of retail sales. FedEx and UPS will provide the delivery for the purchases over the internet which will increase substantially with the disposable income of the new generation and the ability and ease of which the new generation takes to making purchases online as it is found to be more convenient. just as the new generation requires instant gratification, brick and mortar retail will adapt as well by shipping their shelf goods by FedEx and UPS as a faster means than freight shipping, and will ship smaller and more frequent deliveries as we’ve seen Zara of the Spanish based Inditex do to differentiate themselves from their peers. Zara’s concept of Fast Fashion are new styles that are delivered to stores biweekly and in limited numbers. The constant shippment of goods through FedEx and UPS will add up as other retailers come to adopt this method of service.