This is a guest post by Brian Reeves of Reeves Delivery Group in Kentucky.
E-commerce is the way of the future. Customer shopping habits are rapidly changing, due to the convenience of online ordering versus traditional in-store shopping. Online shopping is predicted to continue its rapid growth. The next phase for our delivery companies will be same day delivery. Our businesses still have a long way to grow.
Outside investors are recognizing the future growth potential of our businesses, which is driving business valuations way up. Some of us are feeling pushed to the limit with E-Commerce contracts that are not as profitable as we have been accustomed to in the past. It’s easy to get frustrated and want to throw in the towel, but there is big potential in the future.
FedEx Ground (FXG) has been in a decades-long competition with UPS for market share. The contractor methodology has allowed the Fedex business model the efficiency to make major strides in this fight.
During competition with UPS, another threat arose. Amazon. Since Amazon announced they were launching a delivery service in 2018, they have quickly grown. Amazon is motivated by faster delivery rather than profit per package. They want to motivate more and more people to order online due to the speed at which the item arrives at their front door.
For example, a person may need soap or other necessities in the morning. If they can order the item on Amazon and get same day delivery, they save the time and hassle of going to a store. Amazon assumes that given the option, many people will shop online rather than in-store.
A balancing act is going on currently in the E-Commerce world. Companies are fighting for market share. To achieve greater market share they must meet the demands of customers, shippers, shareholders, and human resources. Customers want low cost, if not free, shipping.
Shippers want packages shipped at the cheapest rates.
Shareholders expect a profit.
Employees and Contractors must have enough compensation to make it worth it to them. This industry is very capital intensive. It requires trucks, jets, buildings, conveyors, etc. Those expenses put even more pressure on the bottom line. All parties must operate with utmost efficiency to drive the continuing expansion of E-Commerce.
Amazon has one more edge in their pursuit of domination. The stock market. Amazon is consistently a top holding of mutual funds and other investment vehicles. Millions of people around the world pay into a 401k or pension plan every single payday. Those dollars supplement Amazon’s access to capital and reduce the need for revenue growth.
Amazon wasn’t even profitable at inception, but the investment dollars poured in because of the vision of the future that people saw. Contractors struggling for profitability is a result of the demand for growth of E-Commerce.
Efficiency is a mandatory ingredient to continue to satisfy the demand from customers, shippers, shareholders, and the human resources that are required to take E-Commerce to the next level.
We just have to have faith that our businesses and future cash flow will grow along with this transformation.
As always, we welcome your replies and thoughts you’d like to share.