Weak demand and excess capacity mean U.S. express delivery companies are struggling during the holiday season

According to Reuters, in the past few years of the COVID-19 pandemic, major US express delivery companies such as FedEx and UPS have been short of capacity due to excessive demand for e-commerce packages. However, the situation is now moving in the opposite direction, and the capacity has far exceeded market needs.

It is reported that during the holiday express delivery peak period in 2020 and 2021, daily demand exceeded the maximum capacity of express delivery companies.

But U.S. online sales began to slow from Thanksgiving last year through the year-end peak season as more consumers returned to in-store shopping and rising food, fuel and rent costs eroded consumer discretionary spending.

Yet delivery companies like FedEx, UPS and the U.S. Postal Service (USPS) continue to add facilities and staff so they can handle 110 million packages a day this holiday season.

That could exceed peak-season demand of 18 million packages a day, said consultant Satish Jinde, whose holiday peak volume forecasts are closely watched by delivery companies.

The imbalance could hurt couriers’ profits if they don’t hire fewer people during the peak season, because the profits from a small increase in package volume would hardly offset the extra costs of temporary workers, said Jindel, president of consulting firm ShipMatrix.

The overcapacity portends a sharp reversal for express delivery companies.

FedEx warned last week that global demand was slowing faster than it had expected and said it would cut costs by reducing labor hours and consolidating sorting centers.

FedEx overestimated holiday demand last year, and many ground delivery contractors were saddled with the costs of surplus workers and trucks. But UPS said it would stick with its plan to hire more than 100,000 holiday workers this year, the same as last year.

Experts warn that changing market dynamics could mean FedEx and UPS will be more willing to use discounts to retain customers next year.

Editor✎ Ashley/

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