UPS stock had its worst day ever as shipping companies get hit with the Shein effect
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Skimping on shipping… UPS shares fell 12% on Tuesday — its worst day on record — after the parcel titan failed to deliver on investors’ expectations. UPS’s quarterly profit fell over 30% annually, despite the # of packages it sent rising for the first time in two years. The likely reason for the imbalance: customers are choosing slower, cheaper shipping over expedited, premium options (less “Next Day Air,” more “5-7 Day”). At the same time, labor costs to ship those cheaper packages have risen since the Teamsters union negotiated a lucrative new contract for UPS drivers last year. Apparently, UPS’s plan to save $1B by cutting thousands of jobs (announced in January) isn’t offsetting those pay bumps yet.
Anonymous: UPS’s CEO said shipping demand from new customers “blew up” last quarter with “much higher” demand than anticipated. She didn’t name the new customers, but experts have a pretty good idea.
$2 tank, two-week shipping… Experts say Shein and Temu have likely flooded UPS with budget shipments. Together, the Chinese ecomm giants send nearly 600K packages to the US each day, a deluge that’s already squeezed air-freight capacity. Amazon, UPS’s biggest customer, could soon add to the international shipping strain: it’s planning to roll out a service this fall that would compete with Shein and Temu by sending low-priced products directly from China to the US.
Consequences have consequences… and now industries are getting hit with the second-order effects of booming Chinese ecommerce. That boom was fueled partly by a rule that lets retailers avoid paying certain tariffs for shipments worth less than $800. But US lawmakers are starting to question whether that gives Chinese companies an advantage over domestic ones, and US Customs has started to crack down.