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Things must be going well in the parcels business. At $ 2.5m for a 30-second TV commercial during last weekend"s Super Bowl, an ad from FedEx was the one many Americans found the most entertaining. It showed a caveman trying to use a pterodactyl for an express delivery, only to watch it be gobbled up on take-off by a tyrannosaur. What did the world do before FedEx, the ad inquired It might have asked what on earth FedEx did before the arrival of online retailers, which would themselves be sunk without today"s fast and efficient delivery firms.
Consumers and companies continue to flock in droves to the internet to buy and sell things, FedEx reported its busiest period ever last December, when it handled almost 9m packages in a single day. Online retailers also set new records in America. Excluding travel, some $ 82 billion was spent last year buying things over the internet, 24% more than in 2004, according to comScore Networks, which tracks consumer behaviour. Online sales of clothing, computer software, toys, and home and garden products were all up by more than 30%. And most of this stuff was either posted or delivered by parcel companies.
The boom is global, especially now that more companies are outsourcing production. It is becoming increasingly common for products to be delivered direct from factory to consumer. In one evening just before Christmas, a record 225,000 international express packages were handled by UPS at a giant new air-cargo hub, opened by the American logistics firm at Cologne airport in Germany. "The internet has had a profound effect on our business," says David Abney, UPS"s international president. UPS now handles more than 14m packages worldwide every day.
It is striking that postal firms—once seen as obsolete because of the emergence of the internet—are now finding salvation from it. People are paying more bills online and sending more e-mails instead of letters, but most post offices are making up for the thanks to e-commerce. After four years of profits, the United States Postal Service has cleared its loss $11 billion of debt.
Firms such as Amazon and eBay have even helped make Britain"s Royal Mail profitable. It needs to be: on January 1 st , the Royal Mail lost its 350-year-old monopoly on carrying letters. It will face growing competition from rivals, such as Germany"s Deutsche Post, which has expanded vigorously after partial privatization and now owns DHL, another big international delivery company.
Both post offices and express-delivery firms have developed a range of services to help e commerce and eBay"s traders—who listed a colossal 1.9 billion items for sale last year. Among the most popular services are tracking numbers, which allow people to follow the progress of their deliveries on the internet.
How long will the boom continue The parcel companies clearly see plenty of growth ahead—they are making big investments in new cargo hubs and aircraft. But in some areas the limits are already being tested. On February and Amazon, the best-known online retailer, announced a 17% increase in sales to almost $3 billion in its busy fourth quarter. But profits fell because of higher shipping costs.
Amazon has been subsidizing shipping to help boost its sales. Last year it introduced "Amazon Prime", which provides free shipping in return for a one-off payment. The tactic is "very expensive", Amazon"s chief executive, Jeff Bezos, told analysts. But, he added, the early signs are that it does at least encourage people to buy more.
Yet internet-only e-tailers such as Amazon are also facing stiffer competition from bricks-and mortar stores improving their own online offers, including supermarket giants such as Wal-Mart. Some of these also offer "pick-up in-store" options for people buying online but wanting to avoid shipping costs or having to stay at home to take deliveries. Some of the parcels firms have been experimenting with delivering goods to petrol stations, where people can collect packages on their way home. They are also trying to come up with more low-cost services. Convenient, cheaper deliveries will encourage more people to shop online. What challenges are the online retailers now faced with

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The challenges that the online retailers are now faced with ......

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