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Archive for Wednesday, September 2, 2009

FedEx, UPS adjust to consumer slowdown

September 2, 2009

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Rosa Santiago sorts packages before loading them onto delivery trucks Dec. 15, 2008, at the FedEx Express Station in New York. At package delivery behemoths FedEx and UPS, Wall Street’s meltdown meant a sharp drop-off in the number of documents and packages sent overnight.

Rosa Santiago sorts packages before loading them onto delivery trucks Dec. 15, 2008, at the FedEx Express Station in New York. At package delivery behemoths FedEx and UPS, Wall Street’s meltdown meant a sharp drop-off in the number of documents and packages sent overnight.

— When Wall Street collapsed, the paper stopped. Memos, invoices and order forms were left unsent.

At package delivery behemoths FedEx and UPS, last fall’s meltdown and the worst recession in a generation has meant a sharp drop-off in the number of documents and packages sent overnight. And it’s not just the delivery companies’ biggest customers. Small businesses and consumers are opting for slower shipments to save money. In doing so, they’re embracing an often-forgotten virtue — patience.

Like with so many things in this new era of frugality, it isn’t clear if people will remain practical after the economy recovers. For now, though, the desire to save a buck is leaving its stamp on the country’s expansive delivery network.

At FedEx, the loss of millions in overnight documents and packages helped drag sales at the company’s express unit down 25 percent to $4.8 billion in the fiscal fourth-quarter that ended in May. But at FedEx’s unit where the slower packages and documents move mostly by truck rather than air, revenue fell just 1 percent to $1.7 billion.

The average number of packages carried by UPS per day in the U.S. dropped almost 5 percent to 12.5 million from April to June compared with the same period last year. The average amount it collected from each of those packages dropped 8 percent to an average of $8.51, as packages got lighter and moved slower.

The U.S. Postal Service has seen a big drop in the amount of mail and packages being sent overall. But the Postal Service is gaining market share when it comes to the package market, said Gary Reblin, vice president of expedited shipping. The Postal Service’s flat rate boxes allow people to stuff as much as they can into boxes for one price, and customers are also opting for even cheaper — and slower —methods of ground shipping.

Thousands of businesses across the country, are taking things slower, and teaching their clients and employees how to adapt.

Bob Brummond, the chief financial officer of SunStar, an Alexandria, Va.-based media relations firm, said he started to look at the small firm’s shipping costs late last year. He wanted a way to cut costs so he could avoid shedding any of his 13-member staff.

“The value of our company is in our employees — they are our assets,” he said. “And we are trying to keep our assets.”

Until last year, the company spent much of its $20,000 annual mailing budget on overnight documents. After evaluating clients’ needs, the company began instructing employees to slow things down.

The guidelines were simple: Choose e-mail whenever possible. When that’s not an option, send materials by way of the slowest postal service alternative. For those employees that use FedEx to ship: Choose two- or three-day service instead of overnight.

The result? SunStar’s mailing budget is expected to be $6,000 this year, a $14,000 savings.

UPS and FedEx are adjusting, too.

UPS spokesman Norman Black said the company is helping its customers “trade down” because it’s better than the alternative.

“It impacts our revenue, but we do everything we can to help our customers do that,” he said. “We would rather help them do that than lose them as a customer.”

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