More people than ever are shopping online, ordering from home and relying on home delivery. In fact, UPS has reported shipments to U.S. consumers increased 65 percent in Q2 of 2020. This increase has resulted in a $1.77 billion profit for the global logistics company and a 15 percent increase in the share price.
But is this good news for the long-term or only a temporary blip? Back in April, UPS executives forecast a slowdown in online orders after an initial surge in the early days of the pandemic. That slowdown didn’t happen, as UPS CEO Carol Tome told the Associated Press:
“Instead, we saw just the opposite … Consumer online spending surged as stores closed, and people sheltered at home …”
In addition, people received stimulus checks, which, in many cases, they spent ordering goods online. Unit volume and revenue both spiked and stayed high, putting a strain on UPS’s infrastructure.
And, there’s another wrinkle that affects UPS’s consumer PR position. Home deliveries are less profitable, which motivated both UPS and FedEx to add surcharges to their home deliveries. While these additional fees are common at Christmas, they’re less so at other times of the year. As delivery prices go up, both big box retailers and consumers began to notice.
Tome said retailers have the option of trying to hide the increases; “Retailers may squawk at price increases that come their way, large retailers have a way to spread that across (many different shipments) …”
While that’s true, and retailer package delivery options are fairly limited to big retailers selling online, that’s not so for consumers. Goods are available from companies that don’t depend on UPS and FedEx much at all to get their items in the hands of consumers, which could mean more bad news for big retailers not named Amazon.
Given Amazon’s large and increasing delivery infrastructure, the company can set prices across the entire buying experience for their customers. It doesn’t need to put any additional costs on the retailers, who then have to pass those costs along to their customers. From a consumer standpoint, if you have a choice between ordering from a big box store and paying increased shipping prices and ordering from Amazon and getting Prime free shipping, the choice is likely an easy one, unless the item isn’t available except at that retailer.
And, if the surcharges are already being applied in the dog days of summer, what can customers expect during the holiday shopping season? That’s a consumer PR question UPS will have to wrangle within the coming months or it risks losing out on gains and market share to a company that would be all too happy to eat it up.
Ronn Torossian is CEO of 5WPR, a leading NY PR firm.