Parcel Market Update - UPS' Profit Soars to Record

Article Summary:

• Earnings per share almost doubled what was expected (Expected: $1.07 Actual: $2.13)

• This was driven primarily by the increased accessorial charges assessed to the thriving e-commerce segment of their delivery network

  • Domestic Delivery spiked 65.2% which caused them to assess the $0.30 e-commerce surcharge and a handful of “hidden” accessorial charges

UPS reported their Q2 earnings this morning, and we wanted to bring a couple items to your attention:

1. Earnings per share almost doubled what was expected (Expected: $1.07 Actual: $2:13).

2. This was driven primarily by the increased accessorial charges assessed to the thriving e-commerce segment of their delivery network.

   • Domestic Delivery spiked 65.2% which caused them to assess the.30 e-commerce surcharge and a handful of “hidden” accessorial charges

What this means for distributors:

1. UPS has figured out how to dramatically increase profitability in a COVID-19 world.

2. UPS knows UPS shippers have had to change their delivery network and business strategy towards e-commerce.

3. UPS knows most shippers can’t change to FedEx (and vice versa) or strategically renegotiate due to the changing network and environment.

What this means for the bottom line:

1. UPS has levied accessorial charges and made it very difficult for parcel shippers to change and/or not pay these increased charges. Most customers are having to eat the charges and don’t have the staff to recoup any money.

We would love to talk more about this as part of your overall distribution chain/transportation strategy and about how we’re helping other distributors to offset these increases. For more information, please reach out to us at eShipping.biz.

Source: Business Insider