UPS weighs strategy to deliver bulky goods to boost growth

Monday, 28 May 2018 00:00 - - {{hitsCtrl.values.hits}}

Reuters : United Parcel Service Inc is in talks with at least one U.S. trucking firm to launch an in-home delivery service for large, heavy goods such as couches and treadmills, as the world’s largest package deliverer looks to cash in on one the fastest growing segments of online retail.

UPS and its rival FedEx Corp currently deliver parcels up to 150 pounds (68.04 kg) in weight to a person’s door step, and neither carries packages into a person’s home or handles so-called “white glove” services such as product assembly or installation.

UPS told Reuters it is now eyeing the furniture delivery business - one of the fastest-growing segments of online retail - with Amazon.com Inc, Wayfair Inc and other e-commerce companies competing for market share against chains like Crate and Barrel and big-box stores.

A source familiar with the matter said UPS is in talks to hire trucking company Werner Enterprises to help it compete in this area, potentially by the end of the year. Werner launched its “final-mile” service in 2016, and has been building it out over the last year. Details of a potential partnership remain unclear given the early stages of the discussions, the source added.

Werner declined to comment on the matter, and UPS would not identify who it is in talks with.

Final-mile delivery is a market that Transport Futures economist Noel Perry said could grow to about $12 billion over the next decade, from about $3.7 billion today, thanks in large part to a growing appetite from younger consumers to buy everything from BBQ grills and mattresses to dining room tables online.

“Outsourcing to a trucking firm would allow UPS to enter into the final-mile business without committing its own capital up front to expand its fleet or acquire end-of-line, final-mile infrastructure such as terminals,” R.W. Baird analyst Ben Hartford said.

That could be welcome news to UPS investors waiting on Chief Executive David Abney’s promise to deliver higher margins by pumping billions of dollars into network upgrades and expansions.

When asked about the strategy with bulky goods in an interview with Reuters, UPS Chief Operating Officer Jim Barber said the company has decided it can’t ignore the rising demand for in-home deliveries of furniture, mattresses, and treadmills, and was evaluating different ways to handle the larger cargo.

“You got bigger products moving through networks across the globe,” said Chief Operating Officer Jim Barber. “What we have to do is try and figure out the right way to get them in the right network as we move forward.”