April 26, 2012, 12:15 PM

Online retail sparks a rise in UPS Next-Day air shipments

The carrier also says U.S. domestic package volume rose 4.5% in Q1.

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The average daily volume of packages delivered by United Parcel Service Inc., a major carrier for online retailers, increased 4.5% in the first quarter ended March 31, to 13.24 million packages from 12.67 million a year earlier, the company said today. Helping to drive that increase was a 5.2% rise in the average daily volume of next-day air shipments, to 1.21 million packages from 1.15 million in the same period last year, UPS said. In addition, the average daily volume of what UPS defines as “deferred” air shipments, or those sent as 2- or 3-day air shipments, rose 9.9% to 985,000 packages from 896,000.

The 4.5% increase in overall average daily package volume follows year-over-year increases of 3.4% in the fourth quarter of 2011 and 1.3% for the full year 2011.

UPS did not explain in its Q1 earnings report today what was driving the Q1 increase in next-day air shipments among e-commerce retailers, but a spokesman said that next-day and deferred air shipments are being offered by more online retailers looking to differentiate themselves in a competitive retail market.

Industry experts also attribute the increase to the general rise in e-commerce sales and the corresponding need of consumers to expedite delivery of some of their orders. “I think it’s just the law of larger numbers,” says Paula Rosenblum, managing partner at research and advisory firm Retail Systems Research LLC. “If you’re shifting to buying online but you’re in a hurry, you’re going to request expedited shipping,” she says.

The UPS spokesman adds that UPS also experienced a 30% year-over-year increase in Q1 SurePost shipments, in which UPS ships packages to the United States Postal Service for local delivery. Figures on the number of SurePost shipoments were not available. As in the increase in air shipments, UPS attributes much of the SmartPost increase to the growth of e-commerce.

"Online retailing is really reshaping our industry,” the spokesman says.

UPS also reported for Q1:

● Average daily package volume of U.S. domestic ground shipments increased 4.0% year over year, to 11.04 million packages from 10.62 million.

● Average daily package volume of total international shipments rose about 2.6% year over year, to 2.35 million packages from 2.29 million.

● Average daily package volume of combined U.S. and international shipments increased about 4.2% year over year to 15.59 million packages from 14.96 million. (This average includes more categories than just U.S. domestic ground and international.)

● Revenue from U.S. domestic package shipments rose about 4% year over year to $1.56 billion from $1.50 billion.

● Total revenue rose about 4.4% to $13.14 billion from $12.58 billion.

● Net income rose 6% to $970 million from $915 million.

UPS is the leading carrier among retailers in the Internet Retailer Top 500 Guide, listed as a shipping provider by 112 Top 500 retailers. FedEx Corp. is ranked second, at 96.

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