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Why XPO Logistics Could Be on Retail Giants’ Radar

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XPO Logistics: A premier road carrier

XPO Logistics (XPO) is one of the top ten providers of worldwide logistics (XLI). The company offers supply chain solutions around the globe. Retaining its character as a US-originated company with worldwide operations, it offers a strong value to US retail giants willing to extend their tentacles around the world.

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e-Commerce boom

e-Commerce sales worldwide have been on the rise. Brick-and-mortar retail stores (HD) (LOW) and online retail companies (AMZN) have both been scouting for logistics partners to cater to their delivery needs. There is even a trend of online shopping for bulkier items such refrigerators, sofas, and other furniture and home furnishings. Major parcel delivery giants such as FedEx (FDX) and United Parcel Service (UPS) have been part of that trend and have applied additional charges to transport these large items.

However, these courier giants don’t specialize in the delivery of heavier items due to the low margin, high cost of business-to-customer deliveries. Customers have to pay a high cost for the last mile delivery of such bulky items. The last mile is the movement of merchandise and people from a transportation-logistics hub to a final destination, which can be a home or an office. That’s where XPO Logistics comes into play.

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XPO’s new service offering

In the first quarter of 2017, XPO Logistics launched an end-to-end service offering for e-commerce companies (EBAY) (BABA). Its last-mile service helps e-commerce companies and omnichannel retailers haul goods through their supply chains. XPO operates with an integrated network spanning more than 32 countries with 1,444 locations and 91,000 employees. The company utilizes its network of people, tangible assets, and technology to cater to more than 50,000 customers all over the world.

XPO Logistics witnessed a 24% spike in e-fulfillment volume at its US contract logistics facilities during the period from Black Friday through Cyber Monday in 2017. It hired 6,000 seasonal workers for its US contract logistics operations. That represents a YoY (year-over-year) rise of 20% in workers driven by e-commerce growth.

XPO Logistics is the second-largest LTL (less-than-truckload) provider in North America. It has an LTL network of 283 facilities in the United States and 12 in Canada. The company utilizes nine border crossing points between the United States and Canada, the highest among LTL carriers.

In the next part, we’ll take a look at what analysts think about the possible Home Depot–XPO Logistics acquisition.

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