FedEx and UPS may need to rethink their business strategies.
Shippers and businesses worldwide—especially in Asia—appear to have shifted the way they move items and goods. FedEx last week reported its third straight year-over-year decline in quarterly net profit, and blamed much of the drop on a massive move away from the company’s most premium, highest-speed services.
It’s not that FedEx’s aircraft are empty. It’s just that, instead of paying to ship something overnight, companies are increasingly paying less to ship something more slowly. Delivery is still guaranteed, just not as fast—and importantly, not nearly as expensive.
UPS has been reporting the same trend. And both companies, as well as air cargo industry observers, believe the trend may be permanent. Shippers are doing a little more planning and spending money more wisely. FedEx and UPS are strong companies with diversified product offerings, so they can certainly adjust. (FedEx announced last week that it will cut capacity to/from Asia.) But both are likely doing some serious thinking about how they price and market their offerings.