Originally published December 20, 2019
In the next 24 months, FedEx (NYSE:FDX) will either be acquired or lose an additional 40%+ in value. The likely acquirer is Walmart (WMT). The gangster move: a merger with Shopify (SHOP).
In July 2017 we predicted, "If Bezos tomorrow said, 'We see overnight delivery as a huge opportunity,' the $150 billion of market cap of DHL, FedEx, and UPS would begin leaking to Amazon."
This has happened. Since the launch of Amazon's (AMZN) delivery service in February 2018, FedEx has lost $25 billion (39%) in value, despite the S&P's 24% gain. Amazon has added $240 billion (33%). In less than two years, Amazon captured nearly one-fifth of the market for e-commerce deliveries in the U.S.
Since 2014, U.S. e-commerce has increased 84%, creating a massive opportunity for the delivery industry. But instead, there has been a transfer of wealth from FedEx, UPS, and the U.S. government to Amazon. Amazon enters high-friction, low-margin businesses as a means of differentiating low-friction, high-margin businesses (AWS and AMG).
How We Got Here - Featurizing
Network effects, cheap capital, idolatry of innovators, and a feckless DOJ/FTC have resulted in a monopoly era where a wildly profitable business (phones, digital marketing, loyalty programs, cloud, Yoda dolls) can generate such staggering value ("antimatter") that entire industries become loss leaders ("features") to differentiate and protect the antimatter. Netscape, the fastest-growing software firm in history, went from antimatter to feature when Microsoft (MSFT) began bundling Internet Explorer with Office.
I served on the board of a visual commerce SaaS firm (Olapic) until we sold for $130 million in 2016. There was a great deal of discussion on whether to sell. I urged the founders, naturally optimistic about the firm's prospects, to sell. The difference between $1 million and $10 million in wealth is meaningful (go big), but the difference between 0 and $1 million is profound (sell). Every
