FedEx and UPS Face Rising Competition in Last-Mile Delivery Market

FedEx and UPS are experiencing intensified competition in the last-mile delivery sector, according to a recent survey by AlixPartners. The survey highlights that while FedEx has gained traction as a primary last-mile carrier, UPS is losing market share. Retailers are increasingly prioritizing cost efficiency over the rapid delivery speeds that consumers have come to expect, such as same-day delivery, which has not proven financially viable. The survey reveals that 42% of retail executives now cite FedEx as their primary last-mile carrier, marking a 15% increase from the previous year. In contrast, UPS's share has dropped significantly, from 35% in 2023 to just 25% in 2024. This shift is attributed to retailers diversifying their delivery options, with two out of five executives reporting a switch away from either FedEx or UPS to alternative providers. UPS has also faced challenges due to contract negotiations with the Teamsters and the loss of customers to long-term agreements with other carriers. Despite the competitive landscape, free delivery remains a crucial factor for consumers, with 92% indicating it influences their purchasing decisions. However, the average consumer's patience for delivery has diminished, with a maximum wait time of 3.5 days before they consider shopping elsewhere. Retailers are responding by adjusting their policies, with 64% increasing the minimum order value for free shipping and tightening return policies to enhance profitability. In a notable trend, over 80% of consumers expressed a willingness to travel 15-30 minutes for free in-store returns, highlighting the importance of convenience in the evolving retail landscape.