And competition is picking up. The U.S. Postal Service this month cut rates on some Priority Mail packages to compete more effectively with both FedEx and rival United Parcel Service Inc. Tech companies ranging from Google Inc. to Uber Technologies Inc. to Amazon.com Inc. are trying out deliveries themselves.
FedEx said in its fourth quarter that a large customer left and caused the package volume at its no-frills Smartpost business to fall by 8%. Analysts say it was Amazon, and that it moved an estimated 50 million to 60 million packages annually to a mixture of UPS, the USPS and smaller regional delivery companies. FedEx declined to comment because the company is in its quiet period ahead of earnings.
Both UPS and FedEx are effectively increasing prices on ground shipments next year, charging by package size, instead of weight alone. While that move could boost profit, some analysts have cautioned it could backfire by encouraging customers to move their business to either the Postal Service or regional delivery companies. An additional factor: It’s more expensive to keep more box sizes on hand.
Read more: Will FedEx Deliver on Its Target? – WSJ.