Courier and Messenger Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 8,000 courier and messenger services in the US provide express delivery, by air or ground, of documents and parcels within and between cities. Messenger services provide local delivery of documents and parcels as well as groceries, alcoholic beverages, and restaurant meals.

Volatile Fuel Costs

Firms with a fleet of delivery vehicles incur fuel costs that can fluctuate significantly from year to year.

Stiff Competition

The courier segment is dominated by FedEx, UPS and DHL, which have strong brand recognition, national delivery networks, and are easy to contract.

Industry size & Structure

A typical courier firm operates from 1-2 locations, employs 191 workers, and generates about $22-23 million annually. The average messenger firm operates from a single location, employs 38 workers and generates $1-2 million per year.

    • The courier and messenger services industry consists of about 8,000 companies that employ about 957,000 workers and generate about $102 billion annually.
    • The courier segment is highly concentrated with the four largest firms representing 91% of revenue. The messenger segment is highly fragmented with the 50 largest firms representing 45% of revenue.
    • Large courier companies include FedEx, UPS, and DHL. Document and parcel messenger services, which operate locally, include Western Messenger (San Francisco), NY Minute (New York City) and Pro Messenger (Dallas). Grubhub and DoorDash are technology firms that use an app and contracted drivers to order food from client restaurants and deliver it to local customers.
    • About 13% of establishments are franchises. Over 70% of franchised establishments are franchisee-owned.
                                Industry Forecast
                                Courier and Messenger Services Industry Growth
                                Source: Vertical IQ and Inforum

                                Coronavirus Update

                                May 17, 2022 - Small Businesses Recruited To Deliver Amazon Packages
                                • E-commerce giant Amazon is recruiting mom-and-pop shops in rural America to join an experimental delivery program. The company is paying participating small businesses ranging from florists to restaurants to IT shops a per-package fee to deliver Amazon orders within a 10-mile radius to their neighbors’ homes in states like Nebraska, Mississippi, and Alabama. none of businesses are required to have prior delivery experience — just a commitment to deliver Amazon packages seven days a week, around 360 days a year, and a physical location to receive parcels each morning.
                                • E-commerce giant Amazon could overtake UPS as the nation’s largest package carrier this year. Amazon delivered more than 5 billion packages in the US in 2021, while UPS delivered roughly 5.5 billion, according to industry analysts. Amazon has said it could surpass UPS this year even though UPS boasts a more extensive air and ground network. UPS is increasingly targeting areas with a minimal Amazon presence. They include logistics for small and medium-sized businesses without their own warehouses or shipping departments, business-to-business shipments, and the specialized world of delivering pharmaceuticals and other temperature-sensitive medical shipments.
                                • UPS has stopped some operations in two southern Chinese cities, according to Reuters news service. The company has suspended all pickup, delivery, and self-pickup services in Shenzhen and Dongguan after both cities imposed strict restrictions to curb the spread of COVID. China has imposed a zero-tolerance approach to outbreaks that calls for strict lockdowns, mass testing, and government-facility quarantines.
                                • Industry watchers suggest that consumers’ pivot to e-commerce during the pandemic will have lasting effects even after the public health crisis eases. Losing commercial customers and gaining more residential business could be a mixed blessing for couriers like FedEx and UPS. The shift in volume toward residential deliveries compared to commercial ones can hurt carrier profits due to smaller package sizes, more frequent stops, and increased package sorting complexity. UPS and FedEx instituted COVID-19-related peak surcharges to help cover additional volume-related costs. The surcharges primarily apply to large-volume shippers. Parcel firms in the US are expected to increase rates by 5.9% this year compared to the 4.9% increase many implemented in 2021, according to AFS Logistics, but surcharges will likely push parcel shipping rates upwards of 9%. Industry watchers say that the couriers expect to have the upper hand on pricing power as demand for home delivery has skyrocketed during the pandemic.
                                • Opportunities are emerging for smaller regional players as the two biggest couriers – UPS and FedEx – increase rates and, in some cases, refuse volume increases by large shippers, according to FreightWaves. The large couriers are increasingly refusing some shippers’ volume increases, especially for low-margin, difficult-to-handle freight, as shipping demand rises. The imbalance between shipper demand and courier supply bandwidth has given an opening to regional couriers. Experts warn, however, that regional players need to be careful about the new business they pick up to avoid the low-margin challenges experienced by UPS and FedEx.
                                • FedEx’s revenue in the fiscal second quarter of 2022 reached $23.5 billion, an increase of 14% compared to the same period in fiscal 2021. Growth was driven by higher revenue per shipment across all of the company’s transportation segments. UPS posted annual fourth-quarter 2021 revenue of $11.5 billion, an 11.5% rise over the same period a year earlier. UPS’s revenue grew 15% to $97.3 billion for the entire year. Both companies enjoyed increased demand from e-commerce. Carriers’ costs are rising, however, due to higher wages and purchased transportation bandwidth necessary to meet the pandemic-related uptick in parcel volume. UPS said it paid $40 million more than expected for extra labor during the holidays due to the higher pay needed to attract seasonal workers.
                                • On-demand food delivery services grew as consumers sheltered at home, and many restaurant dining rooms were closed. Pricing pressure has led to consolidation, however, due to few differentiators among the top players.Uber completed its purchase of food delivery start-up Postmates in late 2020 to complement its Uber Eats unit. The move also helped shore up Uber’s ridesharing business which struggled as people went out less often. Uber had shown interest in rival Grubhub, but the latter agreed to a merger with Just Eat Takeaway in mid-2020; the deal was completed in mid-June 2021. Bar closures and capacity limits increased consumer thirst for on-demand alcohol delivery services. Uber Eats agreed to buy alcohol delivery company Drizly in early 2021 for $1.1 billion in stock and cash to capitalize on the trend. Uber’s deal for Drizly closed in October 2021.
                                • The massive spike in e-commerce demand has helped to heat up competition among couriers, according to Logistics Management. FedEx has embraced e-commerce by expanding weekend service and catering to small- and medium-sized businesses instead of some larger clients, including Amazon. UPS has tended to focus more on margins by discouraging unfavorable volumes from some customers by charging very high rates. Amazon requires sellers on its platform to offer next-day shipping nationwide. The move is expected to drive demand for Amazon Fulfillment and Amazon Logistics. It will also force FedEx and UPS to expand weekend pick-ups and deliveries. A new coalition of more than 100 smaller carriers – together called the Frontdoor Collective - are joining forces to garner a bigger piece of the last-mile e-commerce pie, according to Business Insider. Most of the firms deliver for Amazon. Frontdoor Collective operates under a franchise model and aims to tap into new sources of revenue by contracting with retailers other than Amazon. Frontdoor claims it can deliver one million packages per day and has a nationwide reach, putting it in direct competition with FedEx and UPS.
                                • Russia’s invasion of Ukraine is likely to worsen the international supply chain disruptions brought on by the pandemic. UPS suspended all shipping services to and from Ukraine and international shipments into Russia. UPS still offered export services from Russia and domestic services in Russia as of late February. FedEx has also temporarily suspended services into and out of Ukraine. The Russian attack, and Western nations’ sanctions in response to it, are expected to exacerbate materials shortages, increase materials and transportation costs, and create logistics and capacity constraints worldwide, according to Supply Chain Dive.
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