UPS is gearing up for peak season in the USA with more B2C options and careful capacity expansion but has played down the potential for same-day deliveries amid news that eBay has shut down its eBay Now delivery service.
The company announced yesterday a major rollout of UPS Access Points to 100 US cities this year after “very positive” results in five test markets (Boston, Chicago, New York City, Washington DC and San Francisco), giving the company 8,000 parcel pick-up locations in the US and a total of 22,000 worldwide by the end of the year. UPS Access Point locations are local businesses, primarily convenience and grocery stores, dry cleaners and delicatessens with extended evening and weekend hours, as well as all 4,400 The UPS Store locations throughout the US.
In parallel, more than 16 million UPS My Choice members worldwide can use the interactive notification service to manage their home deliveries, including direct delivery or re-routing to a UPS Access Point. Earlier this year, 33% of U.S. online shoppers participating in the 2015 UPS Pulse of the Online Shopper™ study, said they want their packages sent to locations other than their home, compared with 26% in 2014, showing a rising preference for alternate delivery locations.
“We listened to consumers who said they were not buying online because they didn’t have a secure delivery location,” stated Alan Gershenhorn, UPS executive vice president and chief commercial officer. “By providing local options, we are improving the e-commerce delivery experience, which helps retailers and UPS.”
B2C deliveries now make up about 45% of UPS’ US domestic parcel deliveries compared to 55% B2B shipments, Gershenhorn told analysts on yesterday's Q2 results conference call. The growth rate for B2C deliveries slowed slightly in the second quarter, he confirmed.
UPS’ Q3 consumer volumes may well be given a boost by Amazon’s high-profile ‘Prime Day’ sales promotion in mid-July as well as other similar events held by other retailers. “We are excited about these innovations,” Gershenhorn commented. “UPS will benefit from these kind of promotions… They have the potential to drive and shift demand.”
Looking further ahead, Myron Gray, President of US Operations, said that UPS is “on track” with its preparations for the fourth quarter peak season. The company has been in intensive talks with customers since the start of the year and will increase capacity and ‘flex the network’ in line with their sales projections, he explained.
The company is working on 10 different projects for hub modernisation, automation and capacity expansion, while the working hours of delivery drivers would be extended but not so many additional drivers would be used this year as in the past, Gray said. Moreover, the additional UPS Access Points would improve “delivery density” while by year-end 70% of US drivers would be using ORION technology which reduces journey times through flexible routing and real-time traffic information analysis.
Asked about peak pricing, Gershenhorn said UPS would handle this on a ‘customer by customer basis’ depending on their needs.
In contrast, UPS executives played down the potential of same-day deliveries for their business. CEO David Abney commented that UPS had stronger growth in late pickups and local delivery early the next day. Gershenhorn said the company had been providing B2B same-day deliveries for 20 years and looked for “cost-effective” solutions for its customers.
Their comments follow the news that eBay has closed down its eBay Now service in the US as part of a ‘simplification’ of its services following the spin-off of online payments business PayPal. The same-day delivery service had been on offer in several US cities, including San Francisco, New York, Dallas and Chicago. In 2013, eBay had announced ambitiously that eBay Now would be rolled out to 25 markets by the end of 2014 but the service apparently failed to generate significant volumes.
“While we saw encouraging results with the eBay Now service, we always intended it as a pilot, and we are now exploring delivery and pick-up/drop-off programs that are relevant to many more of our 25 million sellers, and that cover a wider variety of inventory that consumers tell us they want. We will continue to pilot scheduled delivery in the UK,” the e-commerce company announced.
In contrast, Amazon is pressing ahead with its Prime Now same-day delivery service in the US and has also launched it in London, UK, while Google Express is available in various US cities and diverse start-ups are also trying to compete in the same-day delivery marketplace.
