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It seems that more and more people are now opting for slower shipping methods to save money. Packages no longer "absolutely, positively" need to reach customers overnight, and the profits of FedEx and UPS are being squeezed.

Recently, both of these global shipping giants have lowered their forecasts, partly because customers are shifting to cheaper options, such as ground shipping instead of air freight. This trend may signal what’s to come as the holiday shopping season approaches.

For example, two years ago, Sean Lesczynski decided to stop using expedited shipping to source parts for custom bicycles made in Brooklyn. The high costs were prohibitive for customers, who didn’t mind waiting a few extra weeks to receive their new bikes.

While it might seem counterintuitive that someone willing to spend $5,000 on a bicycle would be unwilling to pay an additional $500 for expedited shipping, for many, this is key to rationalizing or conceptualizing large purchases. Similar to China’s domestic market, many online shoppers consider whether free shipping is available—if there are steep shipping costs, they might reconsider or even abandon the purchase.

Since 2021, demand for expedited shipping has declined every year. The latest quarterly reports show that UPS’s next-day air freight volumes in the U.S. are down 7.1% year-on-year, and FedEx’s priority package volumes fell by 5% last quarter. Both FedEx and UPS have stated that many markets are increasing their cheaper shipping options. This shift has also unnerved investors—UPS’s stock has fallen by 14% this year, while FedEx has risen only 7%.

Early indications suggest that this year’s holiday shopping season—the busiest time of year for shippers—may not see a significant rebound.

A recent survey by supply chain software company project44, which polled more than 1,300 consumers in North America and the UK, found that this year, shoppers are buying gifts earlier than ever before, partly to save on shipping costs. Two-thirds of respondents said they plan to cut back on gift spending this year, with one-quarter citing shipping costs as a primary concern.

Gordon Glazer, a senior consultant at logistics company Shipware, stated that consumers are feeling the pressure. Households are doing everything they can to reduce costs, and they are willing to wait longer for products to arrive to save on expenses.

This year, there are only 17 shipping days between Black Friday and Christmas Eve, so UPS is advising cost-conscious shoppers to plan ahead in order to save. Additionally, both UPS and FedEx will impose surcharges during the peak season.

Amanda Peleman, who runs an Etsy shop in the Detroit area, had to raise her shipping rates by 20% this year due to rising prices from the U.S. Postal Service. Even when customers need to receive their orders by a specific date, many are still opting for slower shipping options, which has put pressure on Peleman.

Consumers' disregard for speed is causing something of an identity crisis for FedEx and UPS. FedEx was founded in 1971 by Fred Smith, who introduced the radical concept of overnight delivery by funneling packages through a central hub. This delivery service became famous for its TV ad slogan: “When it absolutely, positively has to be there overnight.”

UPS, a long-established company, developed its air freight business intermittently throughout the 20th century and finally founded its own airline in the late 1980s to compete with FedEx. The two companies have maintained a competitive relationship, partnering with shippers to offer faster but more expensive delivery options.

Now, with the rise of Amazon, consumers have become accustomed to slower delivery times thanks to incentives for choosing non-next-day delivery. Amazon has cultivated this habit by offering rewards to consumers who opt for slower shipping speeds. Over time, consumers grew accustomed to packages arriving within two days, then one day, and now even within a few hours.

This trend continued during the early stages of the pandemic. Supply chain disruptions and shortages of delivery vehicles, among other issues, led people to abandon expectations of overnight delivery—just receiving a package was enough. Since then, longer delivery times have been widely accepted. Gordon Glazer of Shipware calls this the “post-pandemic lag effect.”

Meanwhile, Chinese e-commerce platforms like SHEIN and TEMU have quickly gained traction in the U.S. by offering ultra-cheap clothing, electronics, and home goods, though their shipping times may take a week or longer. As a result, SHEIN and TEMU are also contributing to the growing demand for low-cost shipping services.

In response, FedEx and UPS have started to make changes to cater to this demand. For instance, UPS launched SurePost, promoting it as a service for “non-urgent, low-value consumer needs.” In July, UPS discussed the growth of SurePost, with CEO Carol Tomé saying: “Two new e-commerce customers joined our network, leading to explosive growth in SurePost volume. You can imagine who those two customers are.”

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Cross-border E-commerce Logistics Baixiaosheng