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UPS not Worried about Competition with Amazon

UPS not Worried about Competition with Amazon
February 12
13:23 2016
Thanks to the recent growth of international package delivery, the United Parcel Service enjoyed higher fourth-quarter earnings than ever before. This accomplishment is a breath of fresh air after two years of disappointing holiday seasons.

In 2013, customers and investors were left without gifts on Christmas Eve when a massive influx of e-commerce orders made on-time deliveries impossible. UPS attempted to avoid the same problem the following year, but ended up overcompensating (and overspending) when the influx of orders never came.

In 2015, the company achieved a Goldilocks season with an on-time delivery rate of 98%. Technology is the main driver of last year’s success, says CFO Richard Peretz of the Atlanta-based company.

UPS implemented a new platform in 2013 called Orion (On-Road Integrated Optimization and Navigation), which significantly increased delivery efficiency. The company also established UPS Access Points – locations where consumers can pick up parcels rather than visiting the oft-busy post office after receiving a “missed delivery” slip.

UPS now has over 20,000 access points in seven countries.

The company also offers MyChoice, a free service allowing consumers to choose the time and place of delivery. “MyChoice is one of the big differentiators for UPS. We’re really giving convenience, choice, and control of the transaction to the end user that hadn’t been in the marketplace. There are 21 million people that are communicating with us now through UPS MyChoice,” said the proud CFO.

Peretz also highlighted the importance of the strong European market. “We’ll be spending over $2 billion to continue to build capacity across the European continent.” UPS’s international adjusted operating profit (led by Europe) increased by 16% during the fourth quarter.

It seems there is only one threat on the horizon for UPS: AmazonDue to package volume and increased costs, Amazon has evolved from one of UPS’s most important consumers to a serious rival. As reported in the Wall Street Journal last December, increasing costs and volume incited Amazon to create its own delivery routes, launch its own freight operation, and start preparing for drone deliveries.

Peretz denies rumors of animosity between UPS and Amazon, but maintains that UPS is the best choice for consumers. “The Amazon relationship is mutually beneficial, and they are a valued customer to UPS,” he said. “The whole space of e-commerce is a great position for UPS because we want to become the shipper of choice. We’re adding things to the market that didn’t exist before.”


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April Kuhlman

April Kuhlman

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