This category covers establishments primarily engaged in the delivery of individually addressed letters, parcels, and packages (generally under 100 pounds), except by means of air transportation or by the United States Postal Service. Delivery is usually made by street or highway within a local area or between cities. Establishments primarily engaged in furnishing air delivery of individually addressed letters, parcels, and packages, except by the United States Postal Service, are classified in SIC 4513: Air Courier Services, and establishments of the United States Postal Service are classified in SIC 4311: United States Postal Service.
492110 (Couriers)
492210 (Local Messengers and Local Delivery)
By the early 2000s, courier services were a multi-billion-dollar U.S. industry. In 2002 alone, industry leaders United Parcel Service (UPS) and FedEx earned some $53 billion and employed approximately 578,000 workers. In the early 2000s, nearly 6,000 establishments operated within the industry. About three-fourths of these firms were local surface or ground-based couriers (those with an operating radius of 50 miles or less), and the remaining ones were non-local couriers. Despite the name recognition owned by UPS and its smaller competitors, local-market establishments with five or fewer employees and annual revenues between $100,000 and $250,000 have been the most common business types in the industry.
The diversity of business activities performed by industry firms was reflected in the number of establishments for which courier service was not their sole business. For example, industry firms included bus lines, messenger services, armored car services, temporary employment firms, business-only couriers, food product delivery companies, bicycle courier companies, newspaper publishers, specialized bank document couriers, couriers who provided "in-house" service for business clients within a single office building, and a wide variety of smaller firms. The vast majority of industry firms serviced local markets—for example, a single urban market and its environs—and offered no air delivery service.
The U.S. ground courier industry delivers packages and parcels generally weighing from 70 to 100 pounds for business and residential customers. (In 1994, however, UPS raised its weight limit to 150 pounds.) The types of delivery available range from overnight (or "next-day") service to two-day and three-to-five-day service with a range of additional services such as international delivery, same-day intercity air delivery (packages picked up in the morning and delivered before 5:00 p.m. that day), and even express overnight service to Europe by 8:30 a.m. the next day. While overnight air service was increasingly the most dominant delivery service provided by air couriers, same-day, two-day, and three-day ground service remained a significant source of revenue for industry firms.
The industry continued to offer a wider range of services and rates to capture the many specialized niches of the package shipping market. For example, UPS introduced five new rate tiers based on commodity density, also later adding a tier for light and bulky parcels. One such service, accepting packages weighing 100 pounds or more, helped UPS and other carriers compete with the small-package niche of the less-than-truckload (LTL) segment of the trucking industry, which transported consolidated loads from different shippers that consisted of individual packages of 500 pounds or less. These traditionally general freight carriers began reacting to the ground couriers' co-optation of their small package business by adopting the same operating strategies that helped the leading couriers dominate their industry: local pick-up and delivery of small packages and parcels, the creation of geographical distribution networks or hubs, and the use of tracking software and high-tech sorting facilities.
The leaders of the air and ground courier industries maintained extensive networks of drop-boxes and staffed drop-off centers in addition to providing on-site package pick up. For example, in addition to tens of thousands of unstaffed drop-boxes and other drop-off facilities, UPS operated the shipping center chain Mail Boxes Etc., Inc. (MBE). By 2003, MBE consisted of some 4,500 worldwide locations, more than 75 percent of which were located in the United States. That same year, FedEx claimed to have more than 8,500 authorized ShipCenters in place, as well as more than 1,200 drop-off locations and more than 43,700 drop boxes. In 2003, the UPS delivery network consisted of more than 600 aircraft, 88,000 vehicles, and 1,748 facilities. The company serviced more than 200 countries and delivered 13.3 million parcels and documents each day in 2002. By comparison, in 2002 FedEx had 652 planes, 98,950 vehicles, serviced more than 210 countries, and had a daily volume of about 5.3 million shipments per day.
UPS was formed in 1907 as American Messenger Company, a telephone message service in Seattle, Washington. In 1913, the company changed its name to Merchants Parcel Delivery when it began delivering small parcels for local department stores. When the company changed its name again to United Parcel Service in 1930, it had expanded its service areas to northern California, New York, New Jersey, and Connecticut. UPS began operating in Los Angeles in 1952 and in the years that followed gradually expanded its services throughout the nation.
As late as 1970, Federal Express was the only package courier in the United States specializing in express delivery, when the United States Postal Service (USPS) began to offer business customers priority mail delivery on an experimental basis. Within five years, the USPS was publicly acknowledging UPS as its principal competitor while Federal Express, aided by a 1974 UPS strike and its memorable slogan "When it absolutely, positively has to be there overnight," began to emerge as the major force in the air segment of the courier market. UPS responded by offering air delivery services, though initially through the use of charter air services. In 1982 it offered guaranteed next-day air delivery to anywhere in the United States and began buying its own air fleet.
In 1986, UPS began automating its operational systems with a five-year $2 billion technology upgrade program that was bolstered by an additional $500 million technology investment each year thereafter. It also countered FedEx's catchy corporate slogan with one of its own: "We run the tightest ship in the shipping business." By 1987 UPS owned 90 planes; by 1988, it offered international service to 41 countries; and between 1987 and 1992 it acquired 16 firms. In 1990, UPS bought a 9.5 percent stake in Mail Boxes, Etc., a franchise neighborhood-oriented mailing and business service company that began offering UPS to its customers for their shipping needs. Between 1991 and 1992, UPS acquired three European courier firms, and by 1993, UPS was delivering 11.5 million packages and documents a day and boasted over 1 million regular customers. In 1996 it paid $110 million in sponsorship and marketing/advertising fees to be the official sponsor of the summer Olympic games in the company's hometown of Atlanta.
The major competitors in the ground courier industry continued to wage a fierce price war with each other and with the air courier industry. This battle resulted in lower rates for small package shippers but reduced earnings for firms in an industry already characterized by narrow profit margins.
The rapid spread of fax and e-mail technology in the 1980s and 1990s represented a significant source of competition for ground couriers (primarily in the same-day delivery niche) and was estimated to have cost the courier industry $75 million in lost business in 1990 alone. At the same time, the adoption of cost-saving "just-in-time" or zero-inventory management policies by many American businesses in the same period created a demand for truckers capable of providing same-day warehouse-tocustomer transport of time-sensitive parts and manufacturing materials. Because of the quick-delivery, short-haul nature of many courier firms, this growing market represented a natural niche for the ground courier industry.
Major industry events of the mid-1990s included the 1996 merger of U.S. Delivery Systems and Corporate Express in the same-day courier segment of the industry; the purchase of three smaller services by Consolidated Delivery and Logistics the same year; United TransNet Inc.'s acquisition of Eddy Messenger Service; and the merger of Quick International Courier and Specialty Mailing Inc. U.S. Delivery Systems, of Houston, Texas, continued its bid to become the leader of the U.S. same-day, point-to-point local courier industry by buying more than 33 smaller delivery services in 85 U.S. cities between 1994 and 1995. In 1996, UPS announced a joint venture with China's Sinotrans-Pekair transportation company to share its express delivery technology in the Chinese market and established a major new Asian-Pacific air express hub in Taiwan. In 1997, UPS also began selling passenger seats on its weekend airfreight flights to exploit the revenue potential of its fleet on Saturdays and Sundays.
Despite UPS' seemingly unassailable dominance of the U.S. ground courier industry, it was never very far away from bad press. In the early 1990s, for example, the carrier was accused of practicing anti-union employment policies, failing to ensure worker safety at package-sorting facilities, raising package weight limits without appropriately retraining employees, and refusing to pay workers overtime for extra hours and missed lunches (resulting in a class-action lawsuit settled out of court for $14 million). Between 1993 and 1995, UPS spent about $1 billion on safety equipment and worker-training programs. However, UPS still had problems. It struggled with charges that it used predatory pricing tactics, and in 1996 the International Transport Workers' Federation launched a campaign to unionize the UPS non-U.S. workforce.
In the 1980s and 1990s, UPS, one of only three U.S. companies that competed nationally for small package delivery (Roadway Package system, Inc. and the USPS being the other two), and Federal Express—the air courier leader—increasingly encroached on each other's traditional markets, so much so that the differences between the two firms in services offered and size of fleet were almost negligible. Although UPS did not enter the air courier business until the 1980s, by 1995 double-digit growth in its air express operations allowed a UPS spokesperson to admit that airfreight delivery had completely changed the company's business approach. By late 1995, the UPS air express business was accounting for 25 percent of its annual revenues.
Despite the growth in electronic transmission of data and information, courier services maintained healthy markets into the millennium. For the 1999 Christmas holiday season, UPS expected to deliver 18 million expedited packages on Christmas Eve alone. Normal daily averages for UPS were about 12.5 million per day for 1999.
One of the biggest contributors to the continued success of courier services was the 1998 to 1999 rapid growth of e-commerce, including on-line shopping wherein on-line retailers delivered their parcels—as consumers often requested—by courier shippers. The convenience of the entire transaction outweighed hefty delivery charges for a generation of Web-users accustomed to near-instant gratification. In 1998, UPS shipped approximately 55 percent of all items bought on the Internet during the holiday season; the USPS delivered another 32 percent, followed by FedEx at 10 percent.
As competitors' prices remained parallel, the only real room for growth was overseas, and all three companies sought to secure these lucrative markets. However, higher fuel costs cut deeply into profits in 1998 and 1999, and UPS and FedEx announced increases in their charges of about 3 percent, starting in early 2000.
The terrorist attacks against the United States on September 11, 2001 served to exacerbate an already faltering U.S. economy. In addition to reduced levels of consumer and corporate spending, concerns about the security of deliveries came to the forefront as mail tainted with deadly anthrax bacteria was circulated in the postal system, causing several deaths. Together, these conditions presented serious challenges to courier services. By early 2003, the economy was poised for recovery. However, military conflict in the Middle East served to complicate this upturn. The onset of war in Iraq resulted in a great deal of uncertainty over fuel prices—an important industry dynamic—and caused some carriers to levy fuel surcharges.
E-commerce continued to present ground couriers with great opportunities in the early 2000s. Consistent with earlier trends, e-commerce was slowly changing the dynamics of the business-to-consumer (B2C) retail sector, namely by eliminating layers from traditional retail distribution chains. As more transactions shifted to e-commerce, there was a movement toward higher volumes of smaller, individual shipments—many of which were handled by courier services—from manufacturers to consumers. In contrast, fewer numbers of large shipments were needed from manufacturers to so-called "middlemen" like wholesalers and distributors. According to Standard & Poor's, Zona research revealed that UPS handled about 55 percent of all e-commerce transactions in the early 2000s, followed by the USPS (32 percent).
For the industry's largest firms, foreign markets continued to represent the best growth prospects. By 2001, UPS was making greater inroads in Asia, where FedEx had already established a presence several years before. UPS first extended its reach to the Asia Pacific region in 1988 when it acquired Asian Courier System of Hong Kong. In 1997, UPS forged a joint venture with service agent Delbros, Inc. called UPS-Delbros International Express Ltd., Inc. However, it began direct service to China in March of 2001, after receiving approval from the U.S. Department of Transportation. According to UPS, the market expansion was expected to result in additional revenues of roughly $100 million after one year. One month after it began offering service to China, UPS announced that it had signed a joint letter of intent with the Philippine government for the development of an intra-Asia hub. The company explained that the new hub would enable its planes to access every major city in Asia within four hours. Citing figures from MergeGlobal, in April 2002 Business Week Online reported that the new hub was in a strong position, given that annual growth of almost 17 percent was expected within Asia through 2005.
The most successful couriers remained the large national companies such as UPS, FedEx, DHL Worldwide Express, Purolator Courier, Emery Forwarding, and Airborne Express, which offered air courier and ground operations and competed directly with the ground-only couriers for business. In fact, the largest air couriers maintained sophisticated and extended surface operations that dwarfed the scope of services offered by the majority of companies in the ground courier industry. Another important provider of services closely related to the ground courier industry was USPS, which began to market itself as a direct competitor to UPS and FedEx in the delivery of two- to three-day parcels and documents.
In 2002, UPS earned $3.2 billion on revenues of $31.3 billion. The company has dealt with labor problems from the Teamsters, who filed a grievance in late 1999 claiming that UPS failed to meet its obligation under a settlement from the 1997 strike. By 2003, the UPS family of companies had grown to include UPS Air Cargo; UPS Aviation Technologies; UPS Capital Corporation; UPS Consulting; UPS Mail Innovations; Mail Boxes Etc., Inc.; UPS Professional Services; UPS Supply Chain Solutions; and UPS TeleServices.
FedEx Corp. earned $710 million on revenues of $20.6 billion in 2002. Although the company's revenues were only five percent greater than 2001 levels, its net income jumped almost 22 percent. Like UPS, FedEx Corp. was organized into a suite of companies by 2003, including FedEx Express, FedEx Ground, FedEx Freight, FedEx Custom Critical, FedEx Trade Networks, and FedEx Services. FedEx retained its position as the world's largest express-delivery company, with nearly 185,000 employees. In the early 2000s, FedEx was aggressively trying to wrest a larger percentage of the ground delivery market from competitor UPS with its FedEx Ground operations. This effort was aided by the acquisition of Caliber Systems (a former UPS competitor) in the late 1990s, as well as infrastructure and systems investments totaling some $800 million.
In its operations centers, shipping points, and package pickup and delivery trucks, the U.S. ground courier industry was transformed by mobile communications technology and electronic scanning, tracking, and billing technology. Faced with increasing competition from Federal Express in the late 1970s and early 1980s, industry leader UPS inaugurated a technology modernization program in the mid-1980s that transformed it into a technology-driven enterprise with a management information systems (MIS) staff of 4,000. In 1990, UPS began installing a cellular phone system in 50,000 of its fleet trucks that enabled customers to determine the exact status of their packages in real time for a cost of 75 cents. The $150 million system, called DIAD (Delivery Information Acquisition Device), used an electronic pen and clipboard device carried by the driver and was based on "image capture" software that recorded the customer's signature and the package's bar code data. When the driver attached the clipboard to an adapter in the truck, the data was sent via UPS's UPSNet system to the company's main data center for customer access. Among other advantages, the system largely eliminated the problem of verifying illegible signatures, thereby tripling the number of next-day air deliveries made without errors and enabling UPS to include an electronic "replica" of the recipient's signature when providing the shipper with a proof of delivery. In 1992, UPS introduced GroundTrac for electronically tracking packages passing through the UPS system. It also began investing in coded package labels capable of containing more data than existing bar code labels.
UPS also established a toll-free hotline that shippers could call to get a faxed sheet displaying the time and location of their package's delivery and the name of the person who signed for it. By 1996 this simple fax system had evolved into UPS's interactive home page on the World Wide Web, through which customers could check the status of their shipments. Customers also could schedule pickups, get price estimates for shipping their packages, and make billing inquiries. By 1997, Federal Express's online system claimed more than 400,000 customers who generated more than 60 percent of the company's 2 million-plus daily transactions. In January 1997 alone, more than 800,000 packages were tracked via the Web, and its Internet transactions were growing at the rate 10 to 12 percent a month.
Other advanced technology applications that took place in the ground courier industry included parcel processing systems capable of sorting 20,000 packages per hour and satellite computer systems that could locate courier fleet trucks as precisely as 300 yards or better.
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