Yahoo Financeยท2025-09-29 14:06Core Viewpoint - The implementation of demand surcharges by major parcel carriers like UPS and FedEx is being questioned as the market faces reduced retail sales and capacity cuts, potentially driving shippers to alternative delivery options [2][5][8]. Demand and Capacity - During the peak season, an estimated 2.3 billion packages are expected to be delivered in the U.S., which is a 5% increase from the previous year, primarily due to an extra shopping day [3]. - Average daily volume for the holiday shopping season is projected to increase by low double-digits compared to earlier this year, contrasting sharply with nearly 100% growth in 2013 and 50% during the 2020 pandemic [4]. Surcharges and Market Reactions - UPS has introduced an $8.25 surcharge for packages requiring additional handling, set to rise to $10.80 on November 23, with additional surcharges for ground and overnight air shipments starting October 26 [2]. - Critics argue that surcharges in a softer market are short-sighted and may lead to a loss of market share as shippers seek alternatives [5][6][7]. Competitive Landscape - FedEx and UPS are losing market share to competitors like Amazon, Walmart, and independent carriers, with Amazon's domestic parcel volumes increasing by 6.1% in the first half of the year, while UPS and USPS saw declines of 5.4% and 6.7%, respectively [9][10]. - The trend of retailers like Walmart and Target expanding their delivery capabilities is further shrinking the market for traditional carriers [11]. Future Outlook - ShipMatrix predicts that without changes, Amazon, Walmart, and independent carriers will deliver more parcels than the major carriers combined by 2027 [13]. - The diversification of carriers is expected to continue, driven by the adoption of multi-carrier shipping software and the use of gig workers for deliveries [15].