Amazon is waging war with FedEx
Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.
📫 Amazon’s delivery war 📫
The Buy/Sell/Hold Analysis
E-commerce is on a tear, which means shipping is too. In the six months ending August 31, ground deliveries by FedEx surged 20% from the same period a year ago. UPS is so overwhelmed that on Monday it actually imposed a quota on six big retailers — Gap, L.L. Bean, and Nike among them — limiting how much they’re allowed to ship during the holiday.
But this is not just a shipping boom — it’s a war. Amazon, the creator of one- and two-day delivery of everything from groceries to books and furniture, is now out to dominate shipping too. At a time when U.S. and European regulators are filing more and more antitrust cases against Amazon, the e-commerce giant is getting its machine ready, talking of taking over cavernous mall spaces formerly occupied by Sears and J.C. Penney, and converting them to fulfillment centers close to customers. It has leased 12 Boeing 767s, creating a fleet of more than 80 aircraft.
This is the opposite of laying low. As David H. Freedman writes this week in Marker, Amazon, in the case of shipping, has needled what might have stacked up as an ordinary rivalry into something nasty. Reminiscent of the ruthless shenanigans that led to the Supreme Court’s watershed 1911 breakup of Standard Oil, Amazon last Christmas season banned merchants from using FedEx to ship their goods.
Does Amazon wish to be broken up by antitrust regulators — to be forced to stop replicating the merchandise sold by third-party merchants and selling it at cut-rate prices? Does it wish to be forced to do away with Amazon Prime and its cut-rate, money-losing delivery options, which almost no small merchant can hope to match?
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There is dissonance in this picture: The Trump Justice Department’s antitrust division has been aggressive. The Biden Administration is expected to be as tough or tougher. The European Union is not letting up on Amazon. Yet judging by its behavior, Big Tech thinks it’s business as usual.
“What, me worry?” seems to be a highly risky strategy. But when watching Amazon, the impression is less indifference than the conviction that shipping dominance is worth almost any risk.
This is a calculus of Amazon’s own making: If it is in a fix, feeling it must always up its shipping game and now capture the commanding heights of yet another industry, it’s because it itself created unusual — and perhaps unreasonable — customer expectations. But now, if in doing so it gets tripwired by the Justice Department or the EU, it has no one else to blame.
Verdict: Hold
— Steve LeVine
⚡ Lightning Round⚡
⚡ Under Armour tries to salvage its reputation with a Steph Curry brand launch. The athletic-gear company has seen its popularity and profits slip, due in part to its misguided decision to double-down on its most hardcore, dedicated customers. N0w, it’s swinging in the opposite direction, hoping to tap into the broader, younger zeitgeist by launching the Curry Brand, which will sell footwear, apparel, and accessories. But the NBA star’s popularity and youth may be too little, too late for a company that’s consistently struggled to escape Nike’s shadow or halt the ascension of younger athleisure rivals. Sell.
⚡ Ford sales plummet from F-150 production problems, but it’s hardly down and out. The automaker saw a 20.9% decrease in sales in November, due in part to F-150 pickup truck inventory and production challenges caused by the pandemic and stay-at-home precautions. The F-150 — the bestselling truck on the market for four decades — has long been the crown jewel of Ford’s lineup, and a dip in pickup sales stings deep. But Ford has long been plotting its transition to electric, proving it’s got its eye on one day selling to the futuristic cowboy crowd, as well. If Ford has any concerns, it’s less about the F-150’s staying power and more about picking up its pace in the transition to electric. Hold.
⚡ Pinterest shareholders sue company leadership for alleged discrimination. After prominent employees of color at Pinterest went public this summer with allegations about the company’s culture of racial and gender discrimination, more than 200 Pinterest employees staged a virtual walkout in protest of the company’s leadership. Now, the Employees’ Retirement System of Rhode Island, which oversees $8.5 billion in Pinterest assets, is suing top executives at the company including the CEO, and members of the board for failing their fiduciary duty by “perpetrating and permitting” discrimination at the company. If stakeholder capitalism can’t convince companies to behave responsibly, maybe good old-fashioned shareholder capitalism can. Buy.
⚡ There’s no reason for McDonald’s to bring back the McRib — which is the perfect reason to bring it back. For the first time since 2012, the fast-food giant rereleased its cult-favorite McRib nationwide this Wednesday. The McRib is a BBQ-flavored pork sandwich with unexceptional flavor, overly processed ingredients, and outdated marketing appeal that has somehow managed, by nature of its limited availability, to encourage a decades-long fandom of sandwich-chasing devotees. For a company as risk-averse and predictable as McDonald’s, periodically stoking the fire of an unexplainable, almost charming customer phenomenon goes a long way to keep it from succumbing to its more boring, stay-the-course tendencies. Buy.
📈 The Number: 75%
That’s the share of the 3,249 companies listed on Nasdaq that the exchange says fails to meet its newly proposed board diversity requirements.
Nasdaq asked the Securities and Exchanges Commission on Tuesday to approve a new rule requiring companies listed on its stock exchange to have at least one woman and one member of an underrepresented minority group on their corporate board of directors, saying it wants to champion inclusive growth. But while its proposal sends a message about the importance of diversity in corporate leadership, the exchange won’t be too strict about enforcing it: Even though Nasdaq found that more than three-quarters of companies on its exchange don’t currently meet this low bar, companies have up to four years to diversify their boards. Even those that don’t are unlikely to be delisted — a company can simply choose not to comply with these requirements if it provides a written explanation.
Thankfully, one of the other requirements in Nasdaq’s proposal is that companies on its exchange publicly disclose data about board diversity within one year of SEC approval. That could invite some more public scrutiny on companies that refuse to diversify their boards — but don’t expect them to suffer many consequences.
— Kaushik Viswanath, Senior Editor, Marker
📖 Marker Reads of the Week: Why a SPAC bubble is actually good for the economy, and why no one actually knows what Salesforce — the $200 billion company buying Slack — actually does.
🔎 Marker’s New Fixation 🔎
A year ago, the reintroduction of the infamous Boeing 737 MAX to the world’s commercial flights would have been a huge, extensively covered story. But a pandemic, an economic collapse, months of social unrest, and an endless election meant that the plane’s return — starting December 29, after a 20-month ban — is attracting little attention. That’s convenient for Boeing — which just announced a major 737 MAX order from Ryanair — but disconcerting for travelers. I’d certainly like to know whether I might be boarding a plane whose design flaws killed 346 people in two crashes. So I was interested when writer and self-proclaimed “nervous flyer” Clive Thompson pointed out in this Jalopnik write-up on how to find out if the flight you’ve booked is on a 737 MAX. Surprisingly, it may not be noted in your booking process, or even on the plane’s safety card. You may even have to look for physical aspects of the plane itself — for example, “the 737 MAX will often have winglets that extend both up and down.” Of course, by the time you’re sneaking onto the runway to examine your plane’s exterior, it’s probably a little late to change your travel plans.
— Rob Walker
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