Why United Parcel Service and FedEx Corporation Are Hiking Prices

Discussion in 'The Latest UPS Headlines' started by cheryl, Oct 1, 2016.

  1. cheryl

    cheryl I started this. Staff Member

    Why United Parcel Service and FedEx Corporation Are Hiking Prices - Motley Fool

    Why prices are going up
    The pricing increases will grab the headlines, but in reality they are part of a series of actions both companies have been taking to maximize profitability. In short, FedEx and UPS need to take these measures because they are seeing margin pressure as a result of burgeoning e-commerce delivery growth. That pressure shows up in different ways.
    • The need to expand capacity to deal with increased costs brings about higher operational costs -- at least initially eating into gross profit margins.
    • E-commerce demand during peak season is putting pressure on both companies to have the right capacity in place at the right time -- UPS in particular has had issues with this subject.
    • E-commerce vendors are packaging inefficiently and increasingly shipping large, difficult-to-deliver items, such as trampolines or gym equipment.
     
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  2. People want instant gratification. Everything has a price tag. You are paying for convenience and laziness.
     
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  3. Operational needs

    Operational needs Well-Known Member

    Most importantly, they're raising prices because they can.
     
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  4. upschuck

    upschuck Avatar bet gone wrong

    Those three bullet points are crap

    The first two would make only temporary increases, and the third is already happening. The large package surcharge is in around $70s now, I believe.
     
  5. Monkey Butt

    Monkey Butt You can call me Chappy Staff Member

    One of the possible side benefits will be additional buildings which mean opportunities to drive.
    And the addition of more drivers period.
    Hopefully cutting down on driver paid day.
    Look for UPS concessions in 2018 in this area ... but at what cost?
    Maybe tiered pay for drivers?
     
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  6. Monkey Butt

    Monkey Butt You can call me Chappy Staff Member

    Get someone to explain it to you! ;)
     
  7. Orion inc.

    Orion inc. I like turtles

    Tiered pay?? Who are you?? Dave??

    If ups just gave their corporate board a big raise(they did) and they post another big profit year(they will) concessions won't be on the table. They'll have no leverage to argue for them.
     
  8. Monkey Butt

    Monkey Butt You can call me Chappy Staff Member

    Oh, I thought the drivers might be interested in a lower paid day.
     
  9. Operational needs

    Operational needs Well-Known Member

    They'll probably do how Fedex does every time before cutting another benefit. They'll say in order to remain competitive with Fedex, they need to make cuts now, yada, yada, yada. I've heard all the excuses.
     
  10. Monkey Butt

    Monkey Butt You can call me Chappy Staff Member

    Two companies in an industry aren't really in price competition.
    It takes 3.
    That's one of the factors that caused me to sell 90% of UPS Stock when DHL entered the US industry.
     
  11. Monkey Butt

    Monkey Butt You can call me Chappy Staff Member

    Same in aisle 1 as in aisle 2.
     
  12. Orion inc.

    Orion inc. I like turtles

    I don't think two tier will be even entertained at negotiations. Ups might present it but no way the teamsters take a pay cut on dues revenue.