UPS struggles with e-commerce competition

UPS continues to suffer setbacks as more retailers offer free shipping and the delivery atmosphere becomes more competitive.

It's difficult for even large and established companies like UPS to compete against extremely low delivery prices. As a result, UPS's average revenue on e-commerce packages is decreasing every day. ShipMatrix Inc., a shipment-tracking software developer, reported that UPS is delivering 42 percent of e-commerce shipments, as opposed to 55 percent in 1999.

"The numbers add up to one of the biggest challenges in the company's 108-year history," The Wall Street Journal reported. "Under Mr. [David] Abney, a 59-year-old UPS lifer who took over as CEO on Sept. 1, the company is trying to squeeze costs out of its sprawling delivery network and drum up more revenue. UPS is under more pressure than FedEx Corp. and the U.S. Postal Service because UPS is the biggest e-commerce carrier and its two rivals dived into the business later with narrower strategies." 

Abney says the company must increase profit margins despite decreasing demand by passing along costs to consumers. Next year UPS will begin charging based on shipment volume as well as weight, increasing the cost of services.

Even the U.S. Postal Service is getting in on the competition, cutting prices in anticipation of the holiday season in hopes that e-commerce retailers will designate it a preferred carrier. Other competition, ranging from Amazon to the multiple delivery start-ups we've seen in recent days, are making the shipment scene more diverse as well. But Abney isn't too worried about UPS's current setbacks, seeming confident that the company can successfully adapt to its changing environment.

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