What’s behind UPS losing volume from top customers? (2024)

FAQs

What’s behind UPS losing volume from top customers? ›

Amazon making more deliveries in house, shifts to other carriers and buy online, pick up in store initiatives contributed to the company's Q4 volume decline. This audio is auto-generated.

Over the last year, UPS has continued to struggle with package volume decline across the board. In mid-2023, much of the decline in business customers was attributed to the lengthy labor contract negotiations with the Teamsters.

UPS is cutting jobs and considering selling one of its businesses as shipping volumes decline.

A carrier weathering reduced revenue from its largest customer would normally be something to avoid, but UPS' shrinking Amazon business is intentional. The e-commerce titan has been gradually relying on UPS less for deliveries under an arranged agreement between the two companies.

Amazon is shifting away from UPS and other carriers as it works to build its own logistics empire, in part to gain greater control over transit times and the end-customer's delivery experience. Meanwhile, UPS has chased growth in segments outside of e-commerce in order to boost its profit margins.

UPS saw its fortunes surge early in the pandemic as online shopping became a more central part of people's lives, but package volume has decreased since then. The company on Tuesday said package volume fell 7.4 percent in the fourth quarter, while revenue declined 7.8 percent year-over-year.

Sandy Springs-based UPS announced it is cutting 12,000 jobs, after rocky economic conditions and lost business from labor negotiations last year led to a sharp decline in its 2023 revenue and profit. The shipping giant on Tuesday reported a $6.7 billion profit for the full year, down nearly 42% from 2022.

United Parcel Service is forecast to grow earnings and revenue by 12.9% and 5% per annum respectively. EPS is expected to grow by 13.8% per annum. Return on equity is forecast to be 42.3% in 3 years.

UPS' “top five decliners” included its top customer, Amazon, which has continued to decrease its delivery activity with UPS as part of a mutually agreed reduction in volume.

For 2024, UPS reaffirms its full-year, consolidated financial targets: Consolidated revenue to range from approximately $92.0 billion to $94.5 billion. Consolidated adjusted operating margin to range from approximately 10.0% to 10.6% Capital expenditures of approximately $4.5 billion.

Who's bigger, UPS or FedEx? ›

Founded in 1971 by Frederick Wallace Smith, FedEx is headquartered in Memphis, TN. FedEx is the second-largest courier carrier in the U.S, right behind UPS. The company has employed over 475,000 people and has got a revenue of $69 billion. It has active operations in 220 countries.

Amazon.com delivered more packages to U.S. homes in 2022 than United Parcel Service, after eclipsing FedEx in 2020, and making it the biggest private parcel carrier in the country.

UPS can survive without Amazon still even though it seems like they can't. UPS can survive a 5% revenue hit.

According to UPS, a box being too big or too small, lacking enough cushioning, poorly placed labels, and unclear delivery instructions can lead to lost packages. Reusing an old box and not removing old labels can also create problems.

Summary. UPS has been losing market share to Amazon, but still has a solid competitive position and is exposed to ongoing growth in eCommerce. The overcapacity problem in the small parcel market is expected to improve as eCommerce demand normalizes and structural growth resumes.

The U.S. Postal Service is still the biggest parcel service by volume; it handles hundreds of millions of packages for all three companies. A decade ago Amazon was a major customer for UPS and FedEx, and some executives from the incumbents and analysts mocked the notion that it could someday supplant them.

Revenues in first-half 2024 are expected to decline 1-2% year over year. Consolidated adjusted operating profit is likely to plummet 20-30% year over year in first-half 2024. The gloomy near-term forecasts resulted in the stock declining 8.16% on Mar 26.

Severe weather, natural disasters, and other conditions beyond our control can occasionally delay or disrupt our UPS services.

Now, more layoffs are on the horizon. Headcount reductions in 2024 will be concentrated within management roles and contracted positions, with 75% of the cuts coming in the first half of 2024, executives said. UPS will see a $1 billion benefit this year from the reductions.