What factors are contributing to the shift in parcel delivery market share from traditional carriers like FedEx and UPS to private fleets? How has Walmart’s delivery network influenced its e-commerce growth? What projections are made regarding U.S. parcel volume growth over the next few years?
Walmart’s in-house delivery fleet is helping grow online sales and take delivery business from FedEx and UPS. Americans are shipping more parcels than ever, but traditional parcel carriers FedEx and UPS are losing market share to private fleets operated by online retailers and regional couriers, many of which have sprouted in recent years to meet e-commerce demand for last-mile delivery. That’s the conclusion of a report on Thursday from ShipMatrix Inc., a parcel management, consulting and analytics firm with a strong history assessing industry trends. In 2024, parcel volumes reached an all-time high of 23.8 billion, up 4% from the prior year and 50% since 2019. Parcel delivery revenues grew 4.1% to $188 billion, with an average revenue of $8 per parcel.
ShipMatrix estimates U.S. parcel volume will grow at a compound annual rate of 4% over the next three years to 26.8 billion in 2027. “However, most of that growth will be handled by private networks of Amazon, Walmart and other retailers, resulting in a flat to negative growth for UPS, FedEx and USPS,” the report said. FedEx and UPS face keen competition in parcel shipping from Amazon Logistics, Walmart, and Target, as well as smaller independent carriers such as OnTrac, Better Trucks, Jitsu, Veho, SpeedX, and UniUni.
The growth of volume among companies that are, or were, the largest customers of FedEx, UPS, and the U.S. Postal Service is the most dramatic market development in recent years and poses an ongoing risk to the legacy carriers, ShipMatrix said. Amazon dropped FedEx as a carrier five years ago. UPS said in January it will slash volumes it handles for Amazon by 50% over the next 18 months as it focuses on higher-yield freight. Amazon delivered 6.1 billion packages in 2024 compared to 1.7 billion in 2019. Other carriers, led by Walmart, saw growth jump 44% year over year to 2.3 billion packages. The number of shipments for this cohort has nearly quadrupled from 600 million in 2019. UPS parcel volume of 4.8 billion was flat year over year, while FedEx recorded a marginal decrease to 3.4 billion packages.
Parcel industry revenue growth has normalized after spiking in 2021 and 2022 when consumers were reluctant to shop in person because of COVID and heavily relied on ordering goods from their computers or mobile devices. UPS led the way in revenue last year at $59.8 billion. Other carriers, excluding Amazon, FedEx, and the Postal Service, experienced 48% revenue growth to $13 billion. Walmart’s ability to fulfill orders from its stores and clubs has been a key driver of its e-commerce growth, CEO Doug McMillon said during an investor town hall on Wednesday. The retailer’s coverage of U.S. households with same-day delivery has grown by 22% during the past two years. The company can now provide same-day delivery to 93% of U.S. residences, up from 76% of households two years ago, he said.
Management said e-commerce represents 17% of the retailer’s total net sales and expects it to contribute 50% of topline growth over the next five years. The U.S. e-commerce business has turned a corner this quarter and the company now forecasts it to achieve profitability for the full year after, McMillon said. In related news, Shipium, a shipping platform for e-commerce brands, has added UniUni to its carrier network, the last-mile logistics company announced on Tuesday. ShipMatrix said it relied on company reports, regulatory filings, and other data sources for its findings. Fun facts from the ShipMatrix report include that some 67 million parcels are delivered per day, and seventy parcels were delivered per adult in 2024, or 1.8 parcels per week. The demand allows carriers to build network density for business-to-consumer deliveries.
FedEx and UPS Lose Parcel Market Share to Big Retailers and Smaller Couriers
In an ever-evolving logistics landscape, two giants of the parcel delivery industry, FedEx and UPS, are experiencing a noticeable decline in their market share. This trend can be attributed to several factors, including the rise of e-commerce, strategic shifts among major retailers, and the emergence of smaller niche couriers that are adept at meeting specific customer needs. As grocery chains, big-box retailers, and startups capitalize on their own logistics networks, the traditional parcel delivery models that FedEx and UPS have relied upon for decades are being challenged like never before.
The Dominance of E-Commerce
The explosion of e-commerce has reshaped consumer behavior, with shopping increasingly shifting online. The COVID-19 pandemic accelerated this trend, as more consumers turned to online platforms for their shopping needs. Retail giants such as Amazon, Walmart, and Target have invested significantly in their logistics and delivery infrastructures to meet the demands of their expanding online customer bases. This has led to a fundamental shift in how packages are delivered, with retailers looking to exert more control over their supply chains.
Amazon, a significant disruptor in the parcel delivery market, has developed its own logistics operation. By investing in shipping technology and networks, the company has reduced its reliance on traditional carriers like FedEx and UPS. This has resulted in a significant portion of packages being delivered through Amazon’s own fleet, which includes specialized delivery drivers and Prime Air drone services. The success of Amazon’s delivery network has not only inspired other retailers to follow suit but has also created an environment where consumers are increasingly expecting faster, more reliable delivery options directly from the retailers themselves.
Retailer Strategies and Direct Delivery
In addition to investing in their own logistics networks, many major retailers have implemented strategies to enhance their last-mile delivery capabilities. Companies like Walmart have expanded their delivery services, enabling customers to order groceries online and receive them the same day. Through partnerships with smaller couriers and an increased focus on fulfilling online orders through their physical stores, these retailers are directly challenging the delivery dominance of FedEx and UPS.
Walmart has taken it a step further by initiating its own delivery service, which utilizes its extensive network of local stores as fulfillment centers. This approach not only reduces shipping costs but also enables rapid delivery times, often within hours. By integrating their supply chain with their retail operations, Walmart can respond to consumer demands more fluidly while undercutting traditional parcel carriers.
The Rise of Smaller Couriers
While retail giants have strengthened their logistics capabilities, smaller couriers have also begun to carve out a niche in the parcel delivery market. These companies offer specialized services such as same-day delivery, hyper-local distribution, and flexibility that larger couriers often struggle to match. Startups like DoorDash, Postmates, and Uber Freight have transitioned from food and ride-sharing into package delivery, capitalizing on evolving consumer expectations for speed and convenience.
Smaller couriers tend to focus on specific geographic areas, allowing them to operate more efficiently and provide a customer-centric experience. They often leverage technology to route deliveries effectively and provide real-time tracking, which enhances customer satisfaction. This level of personalized service is something that FedEx and UPS, with their extensive logistical frameworks, may find challenging to replicate at scale.
Implications for FedEx and UPS
The challenges posed by both large retailers and smaller couriers cannot be understated. As FedEx and UPS lose market share, they must adapt their strategies to compete effectively in this new environment. This could mean increasing collaborations with retailers, enhancing their technology platforms, or even exploring new service offerings. To fend off competition, FedEx, for instance, has started providing tailored logistics solutions to e-commerce businesses and exploring on-demand delivery solutions.
Furthermore, both giants need to invest aggressively in technology. Innovations such as artificial intelligence, machine learning, and advanced robotics can help streamline operations and enhance overall efficiency. Investing in last-mile delivery technology could also pay dividends, enabling both companies to compete more effectively with the agile systems used by emerging couriers and large retailers.
Conclusion
The parcel delivery industry is undergoing a transformation driven by the significant shifts in commerce and consumer behavior. With increasing competition from large retailers establishing their own logistics networks and innovative smaller couriers meeting niche needs, FedEx and UPS find themselves at a crucial juncture. Adapting to this new reality will be essential for the survival and growth of these traditional carriers. By embracing technology, forming strategic partnerships, and innovating their service offerings, FedEx and UPS can work towards reclaiming their footing in a market that is increasingly dominated by those who are agile enough to meet the changing demands of consumers. In this era of unprecedented change, the future of parcel delivery will likely look very different, challenging long-held assumptions and redefining what consumers expect from their shipping services.
FedEx and UPS are facing increasing competition in the parcel delivery market, primarily from large retailers and smaller courier services. Retail giants like Amazon have developed their logistics networks, allowing them to handle more of their own deliveries and reduce dependence on traditional carriers. This shift not only affects the volume of packages FedEx and UPS handle but also pressures their pricing models and service offerings.
Smaller courier companies are also gaining traction by focusing on niche markets and providing more flexible, localized delivery options. These firms often leverage technology to optimize routes and enhance customer service, making them appealing alternatives for businesses and consumers alike.
The evolving landscape highlights the necessity for FedEx and UPS to innovate and adapt their strategies to maintain market share. This may involve investing in technology, improving delivery speed and reliability, or forming collaborations with other logistics providers to enhance their service capabilities. As competition intensifies, the larger carriers must find ways to differentiate themselves and meet the changing demands of the marketplace.