Major players in the parcel delivery industry are reportedly facing a weak holiday shipping season as demand for goods slows down.
This shift in pricing strategy reflects the challenges faced by every link in the global supply chain during the peak shipping period, according to the report. The industry is expected to deliver 82 million parcels a day during this holiday season, compared to the average of 90 million parcels a day delivered last year.
The decrease in demand for goods is evident in various sectors, including clothing, electronics and consumer goods, the report said. Consumers are cutting back on spending or redirecting their funds towards travel and services.
In recent years, UPS and FedEx have raised prices in tandem with increasing volume, per the report. However, the current market conditions and shipping volume decreases have forced them to offer discounts and other forms of cost relief to retain customers. The U.S. Postal Service has also decided not to impose a holiday surcharge this year, further intensifying competition in the shipping industry.
In addition to the slowdown in demand, UPS and FedEx are contending with a more crowded field of competitors, according to the report. During capacity constraints in previous years, businesses turned to regional carriers and alternative shipping options like DHL and OnTrac. Furthermore, Amazon Shipping has re-entered the market, increasing competition even further.
To stay competitive, UPS is focusing on providing incentives to customers with parcels that are cheaper and easier to move through their networks, the report said. The company aims to recapture the 1 million parcels a day it lost to rivals during labor negotiations in the summer.
FedEx, on the other hand, is determined to maintain its gained market share by emphasizing its competitive pricing, per the report. The company reported an increase of 400,000 parcels a day from UPS and has expressed a commitment to making it difficult for UPS to win back that share.
“We onboarded new customers who valued our service and were committed to a long-term partnership with FedEx,” Brie Carere, executive vice president and chief customer officer, said Sept. 20 during FedEx’s quarterly earnings call.
It was reported in September that most logistics and fulfillment companies are keeping their holiday hiring flat amid uncertainty about consumer spending. For example, UPS is keeping its holiday hiring flat compared to 2022, while the U.S. Postal Service is planning to hire about a third of the seasonal workers it brought out last year.