A Look into UPS’s Domestic Package Segment

Before venturing into international markets, United Parcel Service (UPS) established itself as the leader in providing time-definite, money-back guaranteed, small package delivery services in the United States. The company has consistently been able to maintain its position despite rising industry competition.

UPS’s Domestic Package segment provides an array of guaranteed ground and air package transportation services, depending on the customer’s need. Customers can choose from various options according to the speed of delivery required.

The segment provides customers with the option to select from a range of guaranteed time and day-definite delivery options such as same day, next day, and even a specified time-of-day guaranteed delivery.

It also offers an economy residential ground service called UPS SurePost for customers with non-urgent, lightweight residential shipments across the nation. UPS uses the services of the United States Postal Service for final delivery.

The company has successfully established an extensive ground network that gives it access to every US business and residential address. The company delivers more ground packages than any other carrier in the nation.

Currently, UPS delivers ~13 million packages every day on time through UPS Ground. Most packages are delivered within one to three business days.

UPS expects its online sales in the United States to double by 2020. Last year, when UPS anticipated an increased peak season, it expanded its domestic operations. It also modernized its equipment to be able to better handle volumes. This required heavy capital investment to the tune of $1 billion in 2014.

In the United States, United Parcel Service (UPS) competes mainly with FedEx (FDX). Smaller rivals include Air T (AIRT) and Air Transport Services Group (ATSG). FedEx forms the largest holding of 13.14% in the iShares Transportation Average ETF (IYT), while UPS forms 7.65% holding. IYT also holds 4.19% in Expeditors International (EXPD).