Retail store closures 'challenge' UPS
- Retail closures are affecting more than just staff and shoppers, it turns out, as UPS is also struggling as a result of reduced business to business (B2B) handling and delivery, The American Journal of Transportation reported last week.
- "We're a little challenged because the number of stores that are closing is having an impact on growth in the B2B," said UPS Chief Financial Officer Richard Peretz in an earnings call. The forecast for its B2B is lower than the previous year, due to lower industrial production and retail forecasts, he added.
- However, the company is also seeing more parcels delivered to stores as retailers "blend" B2B and B2C shipments through omnichannel, according to UPS Chief Commercial Officer Alan Gershenhorn.
Retail store closures may reach a 20-year high this year, with a recent trends report estimating as many as 7,000 shuttered shops in 2017, as the economy shifts to accommodate online commerce. As retailers suffer, so do their logistics partners tasked with managing deliveries to these former stores.
However, UPS and other third-party logistics providers are poised to benefit from this shift, as the need for e-commerce fulfillment will require further outsourcing services like fulfillment. UPS, for example, is currently building 7.5 million square feet in warehouse space, and has plans for up to 35 million square feet, according to Peretz.
"We're building this really for the tremendous opportunity of e-commerce and how that's moving, shopping, from physical stores to online," Peretz said. However, new distribution centers are but a small piece of the puzzle in UPS' roadmap to e-commerce efficiency.
An on-demand economy also means logistics providers must be prepared to deliver smaller packages, more frequently. As a result, in April, UPS began Saturday deliveries to meet the increased demand. Such expansions in logistics networks and service also require additional employees throughout the company.
UPS is not alone in its expansion plans. Amazon, which is attempting to manage its own e-commerce supply chain, is also investing heavily in new distribution centers and hiring thousands of people. Startups, too, are entering the e-commerce logistics space, noting the opportunity.
The shift to e-commerce may be a reckoning for brick-and-mortar retail, but for logistics providers working with the industry, it also presents an opportunity to increase business.
- American Journal of Transportation UPS Says Rash of Shuttered Stores Weighs on Business Deliveries
- Seeking Alpha UPS Q2 2017 Results - Earnings Call Transcripts
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