January 29, 2020 / 10:25 PM / 19 days ago

UPS doubling down on weekend deliveries as e-commerce booms and Amazon looms

(Reuters) - United Parcel Service Inc (UPS.N) said it aims to more than double weekend deliveries in 2020 as package carriers look for ways to satisfy the always-on demands of e-commerce customers, including rising rival Amazon.com Inc (AMZN.O). The world’s biggest online retailer pioneered seven-day delivery in 2013, in partnership with the U.S. Postal Service (USPS), and is now spending billions of dollars to speed up its free shipping.

FILE PHOTO: The logo of United Parcel Service is seen at the new package sorting and delivery UPS hub in Corbeil-Essonnes and Evry, southern Paris, France, June 26, 2018. REUTERS/Charles Platiau

UPS added Sunday to its weekend services at the start of this year, following FedEx Corp (FDX.N), which did the same late last year.

“E-commerce spikes on the weekends, and retailers want those orders delivered sooner,” UPS Chief Marketing Officer Kevin Warren said in a statement ahead of UPS and Amazon’s quarterly reports on Thursday.

UPS said it aimed to expand its year-round Saturday service, which started in 2017, to 40 million more U.S. customers. The company declined to disclose its current weekend volume.

The average volume of overall U.S. weekend deliveries doubled to 13.5 million units between 2013 to 2019, consultancy ShipMatrix said. That was fueled by online retail sales, which surged 127% to almost $591 billion in 2019, according to research firm eMarketer.

UPS aims to attract more retailers that want to keep pace with Amazon shipping speeds, while holding on to its Amazon business, which accounts for almost 20% of company volume.

LensDirect.com Chief Executive Ryan Alovis said UPS’s expanded weekend service means sunglass and contact lens orders that ship on Thursday or Friday hit customer doorsteps on Saturday instead of Monday, helping online retailers compete against Amazon.

“It has leveled the playing field,” Alovis told Reuters.

EXPENSIVE

Weekend operations are more expensive because they skew toward one-off, far-flung residential deliveries - so UPS is attacking the costs, industry experts said.

Amazon, which itself delivered 3.5 billion packages globally last year, has cherry-picked desirable urban deliveries and left the costlier rural business to UPS, USPS and other providers.

The top hourly wage for UPS’s unionized weekend drivers is around $32 per hour, about 15% less than weekday drivers’ top rate but still well above the roughly $15 per hour that Amazon delivery drivers make.

UPS and FedEx need to add more packages per delivery to boost profits on residential shipments, said Dean Maciuba, a director at Logistics Trends & Insights. “The thing preventing that from happening more quickly is Amazon,” Maciuba said. Recent results from FedEx offered a cautionary tale.

The Memphis company in December slashed its 2020 profit forecast, blaming in part higher-than-expected startup costs for its residential service that delivered nearly 8 million packages on Sundays between Black Friday, which last year fell on November 29, and Christmas.

Reporting by Lisa Baertlein in Culver City; Editing by Greg Mitchell and Sonya Hepinstall

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