Amazon's 'built a better mousetrap' for delivery volumes

Amazon (AMZN) has become the king of the hill when it comes to deliveries as the e-commerce giant, according to company documents released by the Wall Street Journal, delivered 4.8 billion packages by Thanksgiving this year — more than its competitors FedEx (FDX) and United Parcel Service (UPS). The company also estimates that it will reach 5.8 billion packages by the end of the year, outpacing its total deliveries compared to last year by 600 million.

Scott Devitt, Wedbush Managing Director, Equity Research, joins Yahoo Finance to discuss why Amazon has continued to become a dominant force in the delivery business.

"The way that the market share has changed is that more merchandise that's retail-oriented that's coming out of Amazon fulfillment centers is making up in the incremental market share gains that Amazon is getting from the other two providers and Amazon's not in the business of picking up packages and delivering, which I think is market share that's probably safe for UPS and FedEx because it rates the retail," Devitt explains.

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Video transcript

JULIE HYMAN: Also, of course, related as we watch all these numbers on this Cyber Monday, Amazon, the new king of the parcel delivery giants, knocking UPS and FedEx out of the running. That's according to company documents seen by the Wall Street Journal. The e-commerce giant had already delivered 4.8 billion packages by Thanksgiving this year, and projects it will do another billion by year end.

Here with more on this is Scott Devitt, Equity Research Managing Director at Wedbush. Scott, it's great to see you. I hope you had a great holiday and that you're doing a lot of buying right now. You know, I'm so curious about this sort of battle, if you will, for package volume. It's something that UPS and FedEx seem to have stepped back on, at least the volume race. Is winning winning in this case? In other words, is it better for Amazon to be doing all this volume itself?

SCOTT DEVITT: Well, happy holidays. And it's always easy for a competitor that's losing to say that they're not going after market share, so that's somewhat comical. But what's happened over the past many years has been that Amazon's taken share of delivery because it's providing packages delivered from itself and also the very large network of merchants that are on its marketplace.

And so where Amazon's taking significant shares, they're taking volume away from UPS and FedEx that would have been delivered by either of those companies under scenarios at which those merchants actually weren't selling on the Amazon Marketplace. And the way that Amazon's been able to do that is because they've increased their own last mile delivery, so they have a full logistics capability within the business.

So, the way that the market share has changed is that more merchandise that's retail oriented that's coming out of Amazon fulfillment centers is making up the incremental market share gains that Amazon's getting from the other two providers. And Amazon's not in the business of picking up packages and delivering, which I think is market share that's probably safe for UPS and FedEx, but as it rates the retail, you know, Amazon's built a better mousetrap.

JOSH LIPTON: And, Scott, for Amazon investors who are listening to this right now, why should they care, Scott? Why should they pay attention to this headline?

SCOTT DEVITT: Well, what's part of the mode of Amazon is the logistics capability that the company has. It's differentiated relative to other retailers, and it's part of what allows the company to gain and grow market share. And so the relevance of it is it's incredibly expensive to build the network that Amazon has, but now that it's in place, it's unmatched, unparalleled, and unable to be replaced by any competition.

So, the benefit that Amazon has is the experience they provide to the customer, which is why consumers go to amazon.com. And because of that, that brings third party merchants onto the marketplace, and Amazon can deliver products faster than any other provider, which is exactly what a consumer prefers on the internet.

And one other data point that I provide is now-- as Amazon has increased the regional aspects of its business in the United States post-pandemic. Now, in the largest 60 metro markets, over 50% of the packages are being delivered same day or next day, which is going to further the advantage this holiday season with the holiday being on a Monday. And just in general, as well, taking share of consumer products categories that are more near-term in nature in terms of the consumer's preference to pick them up at a Walgreens or et cetera.