As we head into peak holiday season, UPS is doubling down on a unique strategy: ship less packages. While this may seem like unlikely logic, UPS continues to focus on higher revenue-generating customers, instead of taking on all the packages it can. The company is doubling down on parcels from small to mid-size shippers, which UPS ultimately earns higher margins from. As a result, the delivery giant has become more profitable than ever.
UPS is Focusing on Shipping Less Packages Overall, and Courting Customers Who Generate More Revenue
While carriers typically generate more revenue with more volume, UPS’ strategy of “selectivity” seems to be working. The company’s revenue from its United States operations rose 7.4% year-over-year, to $14.21 billion. Investors seemed to like the news, sending UPS stock (NYSE:UPS) closing up nearly 12% to above $218 per share.
Carol Tomé, the current CEO of UPS, said that the company is getting more business from small and medium-size shippers, while larger customers (like Amazon), represent a smaller portion of overall shipping volume than they did last year. Even as UPS focuses on small and mid-size shippers, Tomé maintains that UPS still plans to help larger customers as they grow…although as an integral piece of their logistics operations, not the entire thing.
“But we aren’t their supply chain,” Tomé said. “We’re part of their supply chain.”
Prices for UPS Shipping Services Will Continue to Rise
Per Tomé, shipping prices will continue rising through the next year at higher increments. On a statement given on October 26th, Tomé said UPS will raise prices on average of 5.9% in 2022. This figure represents the highest annual increase UPS has announced in nearly a decade. Ultimately, rising shipping costs ultimately puts pressure on online merchants who rely on UPS and other carriers to raise their own prices; either that, or merchants must find other ways to offset higher costs.
All Carriers are Hiring Seasonal Workers to Meet Holiday Shipping Demand
In 2020, holiday shipping volume shattered records as more consumers turned to eCommerce for shopping than ever before. Now, while a good amount of in-store shopping has returned, it still isn’t at pre-pandemic levels. With the anticipated mix of in-store and online orders, carriers expect 2021’s holiday volume to be even greater than 2020’s.
In order to meet the anticipated volume this holiday season, all shipping carriers are pushing to increase their workforces, including UPS. To meet demand and better deliver for customers, the company is hiring 100,000 seasonal workers. Amazon also recently announced a similar push to hire 150,000 seasonal employees. This huge figure means Amazon is expecting a huge surge in packages…which at the end of the day, means more packages for UPS, as well.