UPS SurePost Rate Hike: "This Is Why We Can't Have Nice Things"

Surepost Rates Moving on Up. Thank Shein and Temu.

Last earnings call was a warning shot. UPS came up with a new euphemism.

Why do I love earnings call euphemisms? Another tale.

"two new ecommerce entrants" with explosive growth running a completely different model. Only two guesses needed for these names. Shein and Temu.

25% growth in UPS SurePost volume. In a single year. Really unprecedented.

In response, UPS increased the price of Zone 2 parcels (51-150 miles) by around 10% for parcels . [It's likely difficult for these providers to inject closer than this]. That 10% price hike probably represents the new margin of UPS who is likely making exactly zero margin on these parcels at all now.

I expect it will have immediate ripple effects at Shein and Temu who will seek alternatives. Of course they have negotiated agreements, but the writing is on the wall, and UPS is nobody's fool.

Meaning: light, low cost, late injection, high-growth. Essentially taking advantage of the hardest parts of the network: the last mile, while bypassing first and middle miles of all the providers: both UPS and USPS.

I predict all carriers will need to respond to this. Carriers cannot afford to be taken advantage of. And these low-cost shippers can't afford someone else's margin.

Ultimately, putting politics to the side, it's possible Shein and Temu could be forced to buy a network in the United States to accomodate their volume in much the same way Amazon did -- possibly through a holding company or US co-invested entity if politics did become involved.

Such a new logistics provider would have quite a different model indeed, as well as guaranteed volume.