January 15th, 2022

How to Profit from the Surging Demand for “Overnight” Shipping

overnight shipping

Dear Retail Investor,

There’s a great product called Life Oral Wound Cleanser.

I used it to help heal a nasty sore in my mouth several years ago (courtesy of a tooth-capping procedure my dentist performed on me).

Recently I suffered another mouth sore.

That sent me back to my local CVS to buy more of that oral cleanser.

But they didn’t have any.

Neither did any of the other half dozen or so drug stores I went to.

When you can’t find a product locally that you really need, you order it through Amazon, right?

That’s what I did.

And since I’m an Amazon Prime member, which entitles members to overnight shipping, I figured I’d get it the next day.

Wrong.

You see, Amazon’s overnight delivery service for Prime members doesn’t apply to orders fulfilled by stores that contract with Amazon.

And of course my oral cleanser was coming from one of these stores.

Four days passed before I finally got it.

Since I was in pain, I would’ve paid triple for overnight delivery.

I’ll bet you can also recall times when you would’ve given anything to get what you ordered online right away.

You see, we Americans are an impatient lot.

We want what we want RIGHT NOW!!!

We’re hopelessly addicted to speed and convenience.

Helping satisfy those demands is what enabled Amazon (Nasdaq: AMZN) to grow into the $1.65 trillion behemoth it is today.

Now operations large and small are trying to improve their deliveries.

They have no choice because…

Companies with lousy delivery times risk losing out to competitors that can deliver faster

It’s impossible to overstate the popularity of online shopping, the public’s demand for faster deliveries of their online purchases, and the growth of the parcel delivery market:

  • In that same survey, over 70% of consumers cite convenience and free shipping as their top reasons to shop online .

 

  • 41% of consumers said they are willing to pay a surcharge for same-day delivery in a PWC survey, while 24% of shoppers in that survey said they’d be willing to pay even more to receive packages within one or two hours .
  • In that same survey, 72% of Amazon Prime users said the free shipping that comes with membership was the most important benefit of the service .
  • An EY Future Consumer Index survey reported that only 21% of consumers were willing to forgive retailers for 2021 delivery disruptions caused by the pandemic and supply chain issues.

Bottom line – Americans really want an overnight (and preferably same-day) shipping option for their online purchases.

And with more and more Americans shopping online, that demand will only grow.

Companies that meet that demand should do their shareholders well

But the problem for retail investors like us is that most delivery companies are large caps whose biggest moves are likely behind them.

And they tend to be really expensive.

Amazon – with its obscene market cap of $1.65 trillion – is going for about $3,200 a share right now.

FedEx (NYSE: FDX) has a market cap of $70 billion. Its shares clock in at around $264.

Shares of UPS (NYSE: UPS), which has a market cap of $189 billion, are around $218. 

Target (NYSE: TGT), a $110 billion company, is selling for about $230 a share. 

So…

Is there a small cap company working to get our parcels to us faster?

One with Amazon-like potential?

Maybe.

One intriguing play is Waitr Holdings (Nasdaq: WTRH).

Waitr, which only has a $92 million market cap,  is not a company that delivers all manner of goods.

It operates mainly in the food delivery space and is a direct competitor to DoorDash, Inc. (NYSE DASH).

Like DoorDash, Waitr runs an online ordering technology platform that connects restaurants, delivery drivers and diners.

As such, its technology is designed to get food delivered to at-home diners as fast as possible (there’s nothing more impatient than a hungry American waiting for food delivery, right?).

Waitr is being very aggressive about expanding and improving operations right now.

For example, Waitr just teamed up with Shift4 (Nasdaq: FOUR) to offer its 26,000 U.S. restaurant partners a new dedicated point of sale (POS) system.

That system should improve Waitr’s ordering efficiency and delivery times. 

It’s also partnering with Virtual Dining Concepts (VDC) to provide customers with new dining options from delivery-only establishments through VDC’s virtual kitchens.

(VDC is the world’s largest virtual dining restaurant group.) 

Waitr is also getting into the cannabis delivery space.

To that end, it’s in the process of acquiring a leading cannabis-focused POS, inventory and compliance software business.

That business is privately held Retail Innovation Labs, which serves about 2,000 cannabis dispensaries throughout North America.[DF19] 

At the time of writing, Waitr is selling for about 64 cents a share (a price that makes it a tempting bet). 

Here’s another consideration – a $3 billion company called the Forward Air Corporation (Nasdaq: FWRD).

Forward is a logistics company servicing the U.S. and Canada.

It offers expedited freight delivery, as well as local pick-up and delivery services.

These include final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage, and other parcel handling services.

Forward also offers expedited truckload brokerage and container freight station warehousing.

Its customers include freight forwarders, third-party logistics companies, integrated air cargo carriers, cargo airlines, steamship lines and retailers.[DF21] 

Make no mistake, this is a stock on the move.

It’s gone from about $83 in late September 2021 to around $115 at the time of this writing. 

Yes, it’s not cheap.

But if you want a more traditional play in the parcel delivery space, I think it’s worth a look.

The bottom line is that you’re going to see more companies try to satisfy Americans’ demand for faster deliveries of their online purchases.

Betting on the right ones could do wonders for your portfolio.

That’s it for today.

Doug Fogel
Contributing Editor, Dear Retail

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