UPS reported a 0.4% decline in revenue in the third quarter on Tuesday, but a 3.5% increase in net profit. In a post-earnings conference callwith Wall Street analysts, executives were asked about the possible threat Amazon poses in shipping.
Alex Vecchio of Morgan Stanley asked about the recent reports that Amazon might be developing its own full-blown transportation network. “How do you make sure that you are guarding against the potential outcome where your customers might increasingly become competitors,” he asked.
UPS Chief Commercial Officer Alan Gershenhorn responded, pointing to the company’s integrated network that creates efficiencies and value – “it’s very difficult to match,” he said. UPS makes a million pick-ups a day, and it delivers millions of packages a day. “Our customers are actually receiving the benefit of that scale efficiency of the integrated network.”
He said UPS was “cognizant of the competition out there,” and pointed to the programs UPS had instituted in the ecommerce space, specifically calling out UPS My Choice, UPS Access Point, UPS SurePost, UPS SurePost Redirect, its synchronized delivery service, and i-parcel.
Not only is UPS continuing to monitor the space, he said, but “execute and continue to hone our offering to ensure it’s the best in the business.”
UPS CEO David Abney added that the key was to focus on value to customers. “We have unmatched capabilities and systems and people. And if we stay focused on taking care of the needs of our customers and on providing that value, then we don’t have to worry nearly as much about what the competitors are doing, because we are listening to our customers and focusing on that value.”
Vecchio was likely referring to reports from DC Velocity and RW Baird that Amazon was building out its own logistics infrastructure and could eventually compete with shipping carriers like UPS and FedEx.
UPS also announced on Tuesday its predictions for the holiday season, saying it expects a 10% increase in volume.
Interestingly the Wall Street Journal noted in its earnings coverage that UPS had struggled to deal with peaks caused by holiday shopping volume in the recent past. “UPS spent about $200 million more than it expected in each of the last two years,” the newspaper wrote – “first as it was deluged with unexpected packages in 2013 and then as it spent to overhire and overcompensate last year, during periods that turned out to be slower than expected.”