US transportation stocks plunged Monday morning after Amazon.com Inc. announced expanded logistics offerings that will turn it into a major competitor for parcel carriers and air freight companies, and also impact truckers and third-party brokers.
FedEx Corp. shares fell as much as 7.4% in its worst day in more than a year, while fellow rival United Parcel Service Inc. dropped as much as 8.9%. Logistics firms Forward Air Corp. and GXO Logistics Inc. suffered double-digit declines. Several truckers, including Old Dominion Freight Line Inc., fell more than 5%.
Amazon has been building out its distribution network for years, primarily focused on boosting fast shipping for sellers on its own marketplace. The retailer is now opening that network to businesses beyond Amazon sellers. It will offer freight, distribution and fulfillment, and parcel shipping to standalone customers, from industrial manufacturer 3M Co. to outdoor retailer Lands’ End Inc., Amazon said in a statement Monday.
The announcement “could be a watershed moment for North American freight transportation companies,” Morgan Stanley analyst Ravi Shanker wrote in a note to clients on Monday. Air freight companies and parcel carriers are likely to take the hardest hit, while truckers, railroads, ocean shippers and warehouse operators are also at risk, he added.
Amazon operates an extensive network of warehouses and delivery stations mostly designed to fulfill and deliver customer orders. It is trying to make use of any extra capacity in its network by offering to transport goods as a service even when the transport has nothing to do with Amazon’s core e-commerce business. This increases the total market Amazon can serve and threatens to peel business away from UPS and FedEx.
“Amazon has been heading in this direction for several years, offering portions of its supply chain capabilities as services to non-Amazon sellers,” said Nate Skiver, founder of LPF Spend Management, a shipping consulting firm. “Bringing its end-to-end capabilities to market in a unified service offering stands to disrupt the US logistics market.”
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