What Does This Mean for Other Parcel Carriers?

For years, FedEx and UPS have pretty much had a duopoly on the logistics shipping industry. Both companies are enormously valuable: in 2017, analysts estimated that the UPS brand was worth $22 billion, and FedEx, $18.2 billion.

But brand value growth is stagnating for traditional carriers worldwide. The top six logistics brands that includes FedEx and UPS, grew only 0.2% in aggregate in 2017. UPS’s value shrunk by 1%.

The reason for stagnant growth is simple: vastly increased competition from disruptors and legacy companies alike is slowing down the values of long-established brands.

Who’s Competing with FedEx and UPS?

Customer service is increasingly important to shippers. Often, they’re more satisfied with regional carriers than they are with corporate giants. Larger traditional carriers like DHL continue to introduce cutting-edge services in an effort to eat into the market share of FedEx and UPS.

Public agencies are breaking through, as well. The U.S. Postal Service continues to get higher and higher ratings from shippers, especially as small and medium-sized sellers rely on its flat-rate Priority Mail service. In Europe in 2017, Poste Italiane’s brand grew 20% in 2018, and Deutsche Post grew 29%. The former reorganized and began collecting a greater share of revenue from financial services, and the latter added additional parcel services.

The brand of the year may have been MTR, Hong Kong’s public transport agency, according to the American Journal of Transportation. As an author wrote in March:

“MTR operates one of the most efficient rapid transit systems on the planet, with 99.9% of passengers arriving within 5 minutes of the scheduled time. Its focus on high-quality services is attractive to customers, and protects the brand amongst key stakeholders.”

Finally, of course, there’s the name in the back of every logistics-focused mind: Amazon.

Its forthcoming shipping service, Shipping with Amazon would be a courier-reliant service that moves products from Amazon sellers to warehouses, according to news reports. The company hasn’t yet confirmed that it is developing this program. After reaching Amazon fulfillment centers, parcels would join Amazon’s existing distribution network, which (for now) relies on traditional carriers.

Amazon has enormous market reach. According to some reports, the company captures half of all American dollars spent online. Analysts are mixed on whether it can grow enough to truly challenge FedEx and UPS, but it will certainly eat into their market share.

What Does Stagnant Brand Value Growth Mean for Other Parcel Carriers?

FedEx and UPS have long been the world’s most valuable shipping brands. For four years, UPS has held the top spot. Strategy consulting firm, Brand Finance estimates its brand value at $22 billion. This is down 1% from the previous year as profits dipped.

FedEx’s brand value actually grew 6% last year, bringing it to $18.2 billion. Analysts chalked that growth up to its acquisition of TNT Express, a Netherlands-based courier service that primarily serves markets outside the U.S.

All told, the top six brands in shipping right now — UPS, FedEx, Japan Railways, DHL, Union Pacific and McLane Co. — saw aggregate brand value growth of just 0.2% last year.

These big global brands, analysts say, are trying to serve retailers who want to offer customers free shipping and negotiate hard for lower prices from carriers. In this competitive environment, regional and alternative carriers are increasingly able to undercut the giants. That pulls business from FedEx, UPS and DHL, who must then lower prices even more, and the cycle continues.

This doesn’t mean shipping is getting less valuable overall. It means the market is diversifying. In a time of disruption, smaller companies may have more opportunity to break into the logistics space than they’ve had in years.

This is good news for companies that rely on shipping to do business. FedEx and UPS can no longer count on retailers as customers. They have to offer better prices, expanded services or better customer service to secure it. UPS, for example, is in the process of implementing ORION, a new navigation system that will offer real-time updates to drivers’ routes. ORION is projected to save the company about $400 million annually, while promising to increase delivery speed and reliability.

Are you taking advantage of this competitive market to secure better shipping rates? If not, contact Reveel today to get localized insights into your shipping budget and talk about what items in your carrier invoice to target in your next contract negotiation.

Carriers Need to Develop Distinct Brands

As brand value growth stagnates among traditional industry leaders, there is more pressure than ever among carriers to differentiate their services. It’s essential to stay relevant, and to mitigate the impacts of a future loss of market share to Shipping With Amazon and other newcomers.

Some public agencies, like the U.S. Postal Service and Deutsche Post, have added additional services and kept prices flat, serving a growing audience of online sellers with ongoing routine shipping needs. MTR, Hong Kong’s public transit agency, is growing in popularity as it proves its reliability and commitment to environmental preservation.

At the same time, private innovators like Amazon have sought to bring more shipping in-house, reducing their costs but also taking business away from traditional carriers. And while UPS and FedEx have experimented with last-mile delivery innovations, these venture-funded companies have a lot more room to play with cutting-edge technologies like drones.

As Richard Haigh, Managing Director of consulting firm, Brand Finance told the American Journal of Transportation:

“As Amazon prepares to launch ‘Shipping with Amazon,’ having a strong brand can help protect incumbents from this new competition. Powerful brands alone will not be enough to prevent Amazon from gaining a foothold in the industry; however, they will allow breathing room for the existing brands to riposte and limit their loss of market share.”

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