Most of the focus in recent years on the US parcel sector has been trained on the apparent likelihood that it would be Amazon that would disrupt the market by shipping and delivering parcels for shippers outside of its own business.
Supply Chain Digest Says...
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| The obvious question is whether LaserShip, owned by private equity companies, will continue with acquisitions to fill out the 25% of the US its new combined service will still not service. |
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That may be the case soon enough, but last week a couple of so-called regional parcel carriers announced they are combining in deal that will give the merged company a network that can deliver to most of the US.
Virginia-based LaserShip agreed to buy OnTrac Logistics, out of Arizona, for some $1.3 billion, according to Business Insider. They are the two largest regional parcel players in the US.
When the deal is closed near the end of October, LaserShip will have a network allowing two-day shipping to 74% of the US population, the company says, though to get there will certainly require a lot of network integration, expected to occur through 2022. The two companies will continue to operate separately through the end of the year and thus the 2021 holiday season.
LaserShip also said it would have over 100 sorting and delivery hubs in 30 states and the District of Columbia in its integrated network. The combined company would have revenues of an estimated $1.6 billion.
However, while both companies now offer one- and two-day delivery, it is performed through contracts with final-mile carriers – neither firm owns trucks.
“LaserShip’s acquisition of OnTrac is a transformative step to becoming a national last-mile delivery company by combining the eastern and western regional networks of LaserShip and OnTrac, respectively,” wrote analysts at Moody’s on the impact of the deal.
Moody’s added that “Both LaserShip and OnTrac have exhibited substantial growth in their ecommerce delivery businesses in 2020 and 2021 with significant new customer wins and substantial increases in delivery volumes,” adding that “Strong growth is likely to continue over the next couple of years as consumers become accustomed to less than two-day delivery times for ecommerce purchases.”
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 Regional carriers are used by many shippers, but the regional coverage areas they offer can be a barrier to wider adoption, though interest has risen lately given large hikes in rates and fees and in some cases service limits by UPS and FedEx.
In addition to LaserShip and OnTrac, other regional carriers include LSO in the Southwest, United Delivery Service in the Midwest, Pitt Ohio in the Midwest and Northeast, and United Delivery Service in the upper Midwest.
Many of them are expanding service areas through organic growth. For example, LaserShip recently expanded from its East Coast base into the Southern state of Mississippi, Arkansas and Tennessee, and is said to be looking at Chicago. LSO, which services Texas and Oklahoma, is expanding into Louisiana, Arkansas, Missouri, Illinois and Kansas.
The obvious question is whether LaserShip, owned by private equity companies, will continue with acquisitions to fill out the 25% of the US its new combined service will still not service.
“I see a clear path for them to go nationwide; this is the biggest piece of the puzzle,” said Jon Haber, CEO of parcel logistics consultant Spend Management Experts.
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