According to DHL, the global market for express delivery is about $107
billion, with the U.S. accounting for about $50.5 billion of that sum.
We?re talking a lot of letters and packages. While I wasn?t able to
get published letter-delivery statistics on all the companies, I was
able to extrapolate from hard numbers to get the material you seek.
The stats for UPS and FedEx are drawn from their 10-K filings. The
U.S. Post Office numbers are taken from the organization?s financial
reports (http://www.usps.com/financials/_pdf/Fy2004q3.pdf). And I used
data on DHL?s market share taken from the Deutsche Post Fact Book
(http://investorrelations.dpwn.com/en/ueber_dpwn/investors_factbook_en.pdf)
to extrapolate volumes for that company. Here is the data:
FedEx
FedEx reported an average daily express package volume of 3,167,000
for the fiscal year ended May 2004, with U.S. volume of 2,771,000. Of
those U.S. shipments, 1,846,000 (66.6%) were overnight shipments, and
667,000 (24.1%) were overnight letters.
Total international daily package volume was 396,000, just 12.5% of
all shipments, and FedEx does not break out overnight shipments.
However, we can extrapolate on U.S. numbers to derive an estimate.
Assuming a similar percentage of overnight and deferred delivery in
the U.S. and abroad, international express volume was 264,000, of
which 95,000 were overnight letters. However, that assumption may not
be correct. The average package weight for international shipments is
considerably higher than for American shipments. Couple that fact with
hefty overseas rates for overnight delivery, and it seems reasonable
that overnight deliveries represent a smaller share of the
international business than they represent of U.S. business.
Conservatively, I?d halve the above international estimates,
suggesting daily international express volume of 132,000, of which
47,500 are letters.
UPS
UPS claimed average daily package volume of 13,638,000 in the fiscal
year ended December 2003. UPS reports ground and express packages
together, so the percentage of that volume that represents express
deliveries is low. For clarity, let?s start with U.S. numbers. The
average daily volume of U.S. next-day-air deliveries was 1,185,000
last year, representing 9.6% of all domestic shipments. UPS does not
break out letters vs. packages, but we can use FedEx?s number to
extrapolate. Letters represented 36% of FedEx?s express shipments, so
let?s assume UPS? numbers are similar. Based on the reported volume of
next-day-air shipments, UPS? daily overnight U.S. letter volume was
427,000.
Total international daily package volume was 1,267,000. Assuming
next-day deliveries represent 9.6% of international shipments (a
similar ratio to the U.S. business), international next-day shipment
volume was 122,000 per day. Again assume letters represent 36% of the
shipments, and the daily letter volume is about 44,000.
I don?t have package weights for UPS. However, more than half of UPS?
international shipments began and ended in the same country, and
shipping rates were lower than they were for U.S. shipments,
suggesting that the arguments I used for lowering the international
estimate for FedEx may not apply to UPS. Still, I?d be conservative,
and cut UPS? international next-day deliveries to perhaps two-thirds
of the amount I calculated above, or 81,000 shipments and 29,000
letters.
U.S. Postal Service
While the post office is not publicly traded, it does provide plenty
of financial data. According to the post office?s latest financial
release, it delivered 40,857,000 express shipments in the nine months
ended September 2004. Assuming 273 days in the first nine months,
that?s 149,659 shipments per day. UPS and FedEx remain the dominant
players in the U.S. express-shipment business. Like UPS, the post
office does not break out letters vs. packages. Using the FedEx ratio
again, I estimate the U.S. Postal Service delivers 53,877 overnight
letters each day.
DHL
DHL estimates that FedEx and UPS combine to control about 80% of the
U.S. express-delivery market, including both domestic and export. DHL
further adds that it estimates an 18% share of the U.S. market by
volume, which seems high considering the presence of the post office
and other delivery companies. DHL does not provide express-shipment
counts, but we can approximate a number for the company based on the
numbers we have for FedEx and UPS.
FedEx?s average daily express-shipment volume in the U.S. is
1,846,000. I estimated international express volume at 132,000 per
day. Figure about half of that volume originates in the U.S., and
FedEx?s total U.S. express volume is 1,910,000 per day. UPS? U.S.
next-day volume is 1,185,000 per day. Only about 38% of the
international volume represents actual overseas shipments, the bulk of
which will come from the U.S. As a result, I estimate total UPS volume
at 1,225,000 shipments per day.
Combine FedEx and UPS volumes, and you have 3,135,000 shipments per
day. If that?s 80% of the market, the total market consists of
3,919,000 shipments per day. If DHL controls 18% of that market, it
delivers 705,000 U.S. overnight shipments per day. Again assuming the
FedEx ratio, about 255,000 of the shipments are letters.
Keep in mind that some of the numbers I?ve provided are estimates.
Using the data available, the estimates are reasonable, but they?re
not perfect. For instance, UPS, the post office, and DHL could have a
different ratio of letters to packages than that seen by FedEx.
Statistically, the difference is not likely to be large, but there is
certainly a chance that I overestimated or underestimated the letter
volume for those service providers that did not break out the number.
Because I used company financials, I?m pretty confident in the overall
shipment volume for all the players besides DHL, which reported less
data than the others but is obligated to report even less than it did
provide.
The biggest weakness is DHL?s market-share estimate. As a foreign
company that is also a subsidiary of a larger business, DHL?s
financial reporting is sparse compared to that of UPS, FedEx, and the
postal service. Based on DHL?s market-share estimates and actual data
from the other three players, the combined market share of UPS, FedEx,
the U.S. Postal Service, and DHL is more than 100%, even before
considering other competitors.
I know from experience that market share is difficult to estimate even
when the market is stagnant and contains few competitors, and all
market-share estimates should be viewed with circumspection.
Personally, I suspect DHL is overstating the combined market share of
UPS and FedEx, as well as its own market share, and thus causing my
estimate of the size of the overall market to be too small.
Alternatively, DHL could be right about FedEx and UPS, but too
optimistic about its own market penetration. In either case, DHL?s
actual delivery statistics are likely to be somewhat lower than the
numbers I calculated.
While I did have to extrapolate in a number of places, the numbers I
provided you should be as accurate as any you?re going to get anywhere
else, and certainly paint a reasonable picture of the express-delivery
market.
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