There once was a time when E-Commerce was a gift to delivery services, where replacing all of those personally-picked-up purchases with a truck-delivered one a few days later was distribution company nirvana. But no more. Online merchant efforts to offer free—or severely reduced—home delivery, coupled with the recent trend toward same-day delivery, which often uses local delivery systems have slashed the margins for companies like UPS. And as shipments from the most aggressive shipping cost-cutters—such as Amazon—soar, the profit situation gets worse.
“Even though net income last year was the highest ever at UPS, profit margins on deliveries in the U.S. have been flat for three years, a sign that online sales aren’t helping the bottom line as much as they used to,” reported The Wall Street Journal. “UPS also has lost market share in e-commerce shipments. According to shipment-tracking software developer ShipMatrix Inc., UPS delivers about 42 percent of E-commerce goods, down from the company’s estimate of 55 percent in 1999.”
This situation has hurt UPS more than either FedEx or the U.S. Postal Service because UPS has historically been the largest E-Commerce carrier “and its two rivals dived into the business later with narrower strategies,” the Journal said. Next year, the story said, “UPS will start charging by the size of ground shipments rather than weight alone, effectively raising prices.”