Competition in Delivery Services:

The Internet has provided opportunities for many businesses, big and small, long-established entities and just-formed-today-at-the-kitchen-table start-ups, globally extended and locally focused. One thing these businesses have in common is the need to ship products to customers; most also find it necessary to order supplies to make their special products, with said supplies expected to be delivered right to the door. Servicing this need is the package delivery industry, including the giants UPS and FedEx as well as the U.S. postal service and a number of regional and local courier, shipping, and expediter companies. Demand for reliable, quick delivery of packages and documents increased rapidly, thanks in part to the convenience of ordering items over the Internet; but then came a worldwide recession, an event with consequences for many companies, including delivery services.

One minor U.S. competitor has apparently left the field, focusing instead on international express services. DHL, a subsidiary of Germany-based Deutsche Post World Net, attempted to shore up its money-losing U.S. operations by outsourcing air transport delivery services to UPS instead of maintaining current contracts with air carriers ABX and ASTAR. Following the September 2008 congressional hearings on this business arrangement, cited for costing thousands of jobs and affecting the competitive balance in the industry, DHL's management elected to end all domestic deliveries in the U.S. Still possible is a deal allowing UPS to take over international shipments to the U.S. from DHL's overseas customers.

Atlanta-based UPS, or United Parcel Service, offers door-to-door service in the U.S. and globally, with customers in nearly every country with an airport available to the company's planes. Like other major internationally capable delivery services, UPS is rapidly expanding its operations in China. While demand may be weakening in its home country, UPS has seen demand for rapid and dependable parcel distribution mushroom in developing Asian nations, ones not caught up in recession and banking or mortgage crises.

FedEx, headquartered in Memphis, is facing not only profitability issues related to the economic downturn and its effect on business clients but also legal problems related to the employment status of company drivers as well as their ability to unionize. FedEx delivery truck drivers are hired as independent contractors and not, as is more usual in the industry, as regular employees, ones requiring the red tape and expense of payroll taxes, insurance options, and other benefits. Looking beyond these homegrown headaches, FedEx, much like its chief rival UPS, has made substantial foreign investments, in China and also in India.

USPS, or the United States Postal Service, is a government agency with a monopoly on the distribution of first-class mail. Its package and document delivery services, including overnight air express transport, have become more competitive thanks to 2006 legislation allowing volume discounting. However, the post office's overall financial picture is not so rosy, what with first-class mail volume in sharp decline due to the ubiquity of Internet communications, and with the postmaster hinting at ending 6-day residential mail delivery and even raising the price of stamps yet again.

So, currently, nationwide operators in the parcel delivery business number just three, two international conglomerates with their own airlines, and one a government-run organization with thousands of offices in towns everywhere in the U.S. Yet, although these operators are competitors, they also cooperate on some services, with USPS sometimes outsourcing to FedEx air freight and sometimes handling last-mile distribution for UPS or FedEx. Time will tell if such cosy relationships can survive difficult economic conditions.

Douglas M. Briney, "Federal Express drivers: employees or independent contractors?", Journal of Legal Ethical and Regulatory Issues/FindArticles
"Rep. John Conyers Jr. Holds a Hearing On Competition In The Package Delivery Industry", Political Transcript Wire/AccessMyLibrary
"US Postal Service Says Winning Share Amid Shipping Decline", CNN-Money.com
"Parcel Carriers Tracking Lower", Barrons Online
"Experts Want Laws For China's Express Delivery Industry", TradingMarkets.com