What factors are pushing UPS to seek to deliver much bigger parcels?

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UPS, the world’s largest small package delivery service, is currently in talks with at least one trucking company to start an in-home delivery service for large goods such as appliances and furniture. This move could provide a competitive advantage for UPS, and allow the company to take advantage of the rapid growth in e-commerce sales of larger items.

Reuters reported Thursday that UPS is in early stages of talks with Werner Enterprises, an American freight carrier and logistic providers, about launching the service later this year. E-commerce continues to grow by double digits every year, and the emergence of companies like Wayfair and Joybird have spurred growth in larger and irregular-shaped goods such as couches and washing machines.

In an interview with Reuters, UPS Chief Operating Officer Jim Barber said that the company could not neglect the rising demand for in-home delivery services, and is evaluating different strategies to handle these types of shipments.

“You got bigger products moving through networks across the globe," noted Barber. "What we have to do is try and figure out the right way to get them in the right network as we move forward."

Barber would not go so far as to confirm the talks with Werner, noting that everything was still in the early stages of talks and UPS had not made any commitments to any companies for the service. Werner also declined to comment on the possible relationship. Other major freight and truckload carriers such as Schneider and JB Hunt have also developed solutions for last-mile delivery, and could also be candidates for a partnership with the parcel giant.

A new experience for UPS

This move would mark a departure from traditional practices for UPS in a couple of ways. UPS and parcel rival FedEx currently cap packages at 150 lbs. through their networks, with bulkier non-conveyable goods often facing large surcharges and hefty premiums for delivery.

In addition, UPS has not previously dealt with in-home deliveries. UPS’ residential packages are shipped and delivered outside of customers’ homes, which allows for rapid delivery of a high volume of packages. In-home delivery typically takes longer and is more physically demanding, and UPS would have to commit to spending more time at each residence to provide this service.

However, if properly executed, this service represents a real competitive advantage for UPS over its competitors. FedEx has recently taken steps expand their hubs to accommodate bulky, irregular shipments, but does not have an in-home delivery service for these goods. By seeking out a partnership with a company such as Werner, UPS would be able to take advantage of the rapid growth of bulky e-commerce sales and leverage its reputation in last-mile delivery, all without expanding its existing assets or dedicating a portion of its fleet to these types of shipments.

The proposed partnership would further establish UPS as a one-stop shop for its existing retail partners like Amazon and Walmart, who have increasingly seen gains in online orders of these larger items. Currently, these retailers end up using parcel services like UPS and FedEx to handle smaller objects, and contract with regional carriers for “white glove” in-home delivery services.

In addition, the rapid growth in these kinds of shipments should lead to improved delivery density as time goes on. This should help boost margins for bulky in-home delivery services, as UPS can deliver to multiple locations within a single delivery area.