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Massive overcapacity expected to hit holiday parcel delivery market 

ShipMatrix forecasts daily surplus of 18 million parcels this peak season

Parcel delivery carriers will be confronting massive excess capacity during the peak shipping season and will face severe financial repercussions if they don’t align their resources with what are expected to be flat year-over-year volumes, transportation consultancy ShipMatrix said Monday.

In its annual forecast for peak season activity, ShipMatrix said the market will be saturated with 110 millions of parcel capacity per day. However, daily demand is likely to average 92 million parcels per day. This will create an 18 million daily capacity surplus that will be difficult for carriers to offset without cost reductions.

The 2022 forecasts are in sharp contrast to the 2020 and 2021 peak seasons, when daily demand exceeded capacity by 7.2 million and 1.3 million parcels, respectively, ShipMatrix said.

The flat year-over-year demand is due to more consumers returning to in-store shopping and changes in delivery patterns to reflect more shipments going to stores instead of residences, ShipMatrix said. 

Delivery demand will be hit by rising inflation, which will curb consumers’ discretionary buying power, ShipMatrix said. In addition, more consumer spending is being directed to services such as travel and entertainment and away from goods purchases, ShipMatrix said.

The potential of slowing holiday demand has yet to be reflected in the carriers’ network utilization plans, however. The U.S. Postal Service, for example, said last week it plans to expand its delivery network to handle 60 million daily parcel deliveries. That is up from 53 million last year and will account for 54% of capacity despite the Postal Service controlling 38% of market share by volume, according to ShipMatrix data.

FedEx Corp. (NYSE: FDX) and UPS Inc. (NYSE: UPS) have said they plan to emphasize utilization of their existing assets rather than focus on peak season expansion. However, both will still bring abundant resources to the table this holiday, ShipMatrix said.

The good news for parcel shippers is that they should have more leverage in beating back the plethora of escalating delivery surcharges, according to Satish Jindel, ShipMatrix’s founder and CEO.

In addition, shippers and consumers should experience a higher level of on-time delivery performance because carrier networks will not be as stressed as they have for the past two years, Jindel said.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes FedEx (No. 1) and UPS (No. 2).

6 Comments

  1. The article is about OVERCAPACITY….

    This means there is too many carriers and not enough parcels hence the cost reduction note. Parcel volume is lower for USPS and Fedex.

    USPS parcels are down 20%……they leased 45 building for peak last year and did not need them…..

  2. Who will be carrying all of these excess parcels? Carriers in the office I work have already been mandated to work their days off, and we have 50 something routes and 2 subs!

  3. ever since they started hiring all these new people young people male has been winding up and empty lots thrown off of bridges nobody gets their right now even when you put your name on the mailbox it’s like these kids can’t read and they absolutely have no sense of where they are. how hard is it you look at the street number you look at the street name you look up to see what street you’re on and you deliver the mail to the right numbers it’s not hard but one thing I would like to say in their defense although I don’t know if this is a concern for any of them, what is it with making these addresses so small and so light and print that you can’t read them are we going to blame the lack of printer ink and American now? well then somebody better get out there and kill a whale.

    1. Funny that you insult these new employees saying they can’t read. Meanwhile I had to read your comment a few times to understand it because you failed to use punctuation and capitals when appropriate.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.