Stock Update: FedEx

Stock Update: FedEx

We are long-term investors here at MyWallSt and recommend companies that we believe will have consistent growth for years to come. Updates are an opportunity for us to reaffirm our stance on a company while keeping you up to date on its developments. By renewing our comments with the latest information, we ensure that investors have confidence in our selections, regardless of their start date.

The impacts of the pandemic on consumer behavior cannot be underestimated. While it can be tempting to label these as temporary changes, experts and history say that these are more likely permanent adaptations. For example, evidence suggests that the SARS outbreak in China between 2002 and 2003 was the main catalyst for the country's preference towards online shopping. The crisis pushed retail behemoth Jingdong away from brick-and-mortar stores in favor of their website which quickly became one of the largest online retailers in the world. 2003 was also the launch of Taobao, the business-to-consumer branch of Alibaba.

2020 saw an 18% increase in e-commerce spending — and this wasn't just tech-savvy American millennials ordering their groceries through Amazon. It was people throughout the world and across demographics, many of whom had never shopped online before. New users drove over 50% of the online orders from stores in the U.K., U.S., Germany, France, and South Africa. In the United States, 19% of people over the age of 65 ordered groceries online or through an app over the course of the pandemic. It is likely that these new users will return to an online service, having overcome any barriers to entry and recognizing the convenience.

This means that the coming years will see an exponential boom in shipping, which is great news for big players like FedEx, UPS, and Amazon. However, these companies will need to put in substantial work before they'll be able to handle the anticipated package volume. This was clear in mid-2020 when Amazon was forced to suspend Amazon Shipping — a service for non-Amazon packages — as their delivery sites and personnel were completely overwhelmed with its own customers' orders.

This was a good sign for FedEx, which has spent the last few years building out its international infrastructure and focusing on residential services. This has included the acquisition of Dutch competitor TNT Express and considerable additions to its fleet of trucks and drivers. Most concerning for Amazon, FedEx recently acquired ShopRunner — an annual subscription service that provides free two-day shipping, returns, and exclusive deals for hundreds of brands in the United States. FedEx is hoping this will lure consumers and merchants away from Amazon's platform and give the company access to recurring revenue.

FedEx is investing heavily in its future in an attempt to both capture market share away from its competitors and gain momentum from rapid growth in e-commerce. These moves should provide the brand longevity and allow it to meet the challenges of the future.

In light of this strategy, we have updated our comments on FedEx, to read them click on the stock symbol below. 

Anne MarieAnne Marie

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