Never a Dull Moment in the Shipping Wars

In this MarketFoolery podcast, host Chris Hill is back from SXSW and ready to get back to business with Million Dollar Portfolio's Jason Moser and Stock Advisor Canada's Taylor Muckerman.

In this segment, they consider a pair of interesting pieces of news in package delivery. DHL, which has had some trouble with its previous big pushes into the U.S. market, is making a smaller foray with an expansion to its ground service. That's not just good for DHL -- it benefits all the companies that could use more flexibility and bargaining power with FedEx (FDX 1.37%) and UPS (UPS 0.02%). As for UPS's electric trucks in London, it's a reflection of the continuing improvements that technology is experiencing.

A full transcript follows the video.

This video was recorded on March 19, 2018.

Chris Hill: Interesting things going on in the world of shipping. Taylor, I'll let you decide which one is more interesting. We have DHL, which is expanding its delivery in the United States, kind of a shot across the bow at FedEx and UPS. UPS also came out and announced that they are going electric in London. Of the two, which is the more interesting to you?

Taylor Muckerman: I think the electric vehicles, maybe a long time coming, and it's the wave of the future. Maybe DHL, because they announced it on the same day. Small footprint, though. They're only going to be doing the same day and next day, last mile kind of stuff. But, interesting to note that their headquarters in the U.S. is in Cincinnati, and Amazon (AMZN -2.56%) is planning a new air facility there, in Cincinnati, as well.

So, maybe some potential backdoor dealings there. Who knows if Amazon gets more in the loop with DHL, because we've heard rumors for years that they're trying to get into the delivery game themselves. So, maybe the partnership somewhere down the line. But I don't view it as too big of a threat to UPS or FedEx, just given the potential growth of e-commerce and those short distance deliveries.

Hill: I think it's a smart move by DHL, mainly because of what you said, in terms of, it's a smaller bet. But I think it's informed by the last time DHL really tried to make a go of it in a big way in the U.S., and that did not work out at all.

Muckerman: No, it did not. They're talking about maybe delivering 500 million packages on an annual basis. You're looking at UPS and FedEx doing that and more in a busy holiday season. So, certainly a smaller attempt here than what they previously failed at.

Hill: I think, if you're Amazon, and obviously you have that shipping facility in Cincinnati that you're planning, that's a nice tie in, but Jason, it also seems like this is a small win for any big retailer that's doing significant amounts of shipping. It gives you just ever so slightly more bargaining power with FedEx and UPS.

Jason Moser: Sure. We were talking over the weekend on Motley Fool Money about the bankruptcy at Toys R Us, the impending doom that Sears seems to be subject to, and what is going to happen with all of that real estate. It's not really so easy to tell. That's a lot of real estate. Real estate is priced on the demand, so to speak. And you wonder if Amazon or Target or Walmart or some combination thereof wouldn't be looking at some of those areas as ways to shorten that distance between point A and point B. Which certainly, it benefits these delivery companies, these shipping companies, whether it's UPS, FedEx, DHL or whoever else gets in there. Shortening up that distance from point A to point B is a key variable in the equation for bringing those prices down and making these businesses as profitable as they can be. So, it's going to be a very interesting few years, watching this all shake out.

Muckerman: Yeah. And as for the electrification in London, it's just, new technology is allowing them to hook up multiple trucks to the same outlet, and then the computer model adjusts which truck is receiving how much energy. So, it's a little bit of a smarter grid. They're not relying on one power source for one truck, because that's kind of limiting in their ability to scale here. So, the infrastructure there is just getting smarter. They're looking to go from around 50 all-electric trucks to all 170 in the next couple years. Already, I think, new cabs in Central London have to be electric, so that whole city is kind of moving in that direction.