Uh-oh. United Parcel Service has been taking a close look at its business and it has come to a conclusion that's fairly obvious when you think about it: It costs more money, quite a bit more money, to deliver packages to homes than to businesses.
What to do? Why, charge more for residential deliveries, of course. The change will be phased in as contracts with big shipppers are renegotiated.
UPS put it rather more eloquently in its latest earnings report.
"UPS customers were delighted with the high quality service we delivered during the holiday season," said David Abney, UPS chief executive officer. "However, the financial results were below our expectations.
In other words, Big Brown had a pretty good delivery record in December, delivering 1.3 billion packages, but spent too much doing it.
Leaving aside the flowery language, what it comes down is that it costs UPS quite a bit more in time and fuel to deliver one or two packages to your house than it does to deliver 10 or 15 packages to the eyeglass store on the corner.
You will pay
Ergo, somebody needs to pay a little bit more to have the big brown truck and its big brown or white driver turn onto your block, dash up your sidewalk and drop off that electric toothbrush you ordered from Amazon a few days ago.
And who might that someone be? Why, it's you, of course. One way or another, shipping costs will be passed on to the consumer. Maybe Amazon will still offer free two-day shipping to its Prime customers but it will find a way to recoup the added cost.
It's hardly necessary to add that FedEx and other couriers will be close behind. It might also present an opportunity for the US Postal Service, which has been getting a bigger share of some segments of the home delivery business lately.
It will take a while for all this to be phased in so if it's something that concerns you, here are some options you can start mulling over:
- Have your stuff delivered to a UPS Store or some other central drop-off. Lots of smaller stores, like the Postal Annex chain, will accept packages for a small monthly charge. Besides dodging the residential delivery surcharge, it avoids the problem of theft, missed signature-required deliveries, etc.
- Buy locally. Stores are disappearing but there still a few around. Get an electric car and you can buzz back and forth to the supermarket, Best Buy, Staples, etc., for nothing. Also, you can get your stuff the same day. Why wait?
- Have your merchandise sent to your office or workplace, if your employer doesn't object and if your coworkers won't make off with it when no one's looking.
Whatever you do, don't be in a hurry. It will be at least a few months before the higher delivery charges begin to ripple throuogh the economy and you can be assured that big online retailers will be looking for a solution.
Amazon, for example, is reportedly looking at leasing a batch of Radio Shack stores when that ailing specimen sinks beneath the waves. Maybe Amazon will use the stores as local delivery drop-off points.
Online retailers have to respond aggressively. They've already lost the advantage of not having to charge sales tax and they know they can't also begin tacking on higher shipping charges.
All of the mergers, consolidations, bankruptcies and so forth sometimes make it look like consumers will be held hostage by one or two big retailers, but it's never quite that simple.
Somebody always comes along and throws a new wrench into the works. That causes temporary disruption but results in greater efficiency down the road (unless of course it's wireless or cable service, which seems to immune to basic economic processes).
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