PARCEL EXPRESS
transportationreport
Little guys
get their day
in the sun
Regional parcel carriers have long lived in the shadow
of FedEx and UPS. Will a changing market boost their relevance?
EVERY BUSINESS SECTOR HAS A TIPPING POINT. FOR THE CLUSTER OF COMpanies providing regional parcel shipping services in the United States, the tipping point
may very well have been Jan. 30, 2009.
On that date, DHL Express, one of the “Big Three” parcel companies, ceased domestic
operations, effectively ceding the $55 billion-a-year market to FedEx Corp. and UPS Inc.
With DHL gone, parcel shippers feared it would just be a matter of time before the two
behemoths leveraged their duopoly status to raise rates, jack up fees for add-on services,
and generally behave in ways that resembled a 1,600-pound pachyderm rather than two
800-pound gorillas.
In the Boston suburb of Woburn, Mass., James A. Berluti, president and CEO of Eastern
Connection, a regional parcel firm whose network extends from Maine to Virginia, also
saw the writing on the wall. He realized that, at some point, the marketplace would
demand a third-party player to check the actions of the big boys, especially since DHL had
been the low-price provider. Barring the entry of another large national carrier, a scenario
deemed highly unlikely, established regional players like Eastern Connection would need
to step up and fill the void, he reasoned.
Nearly three years later, much of what parcel shippers envisioned has come true. FedEx
and UPS have raised their base rates in almost identical fashion; increased the number of
“accessorials”—add-on charges for services beyond basic transportation—and hiked
prices on those as well; changed the formula for measuring the dimensions of light-den-sity packages in a way that has led to double-digit rate increases on non-compliant shippers; and begun phasing out relationships with third-party consultants retained by shippers to help them save money on parcel service.
THE SEARCH FOR ALTERNATIVES
In the meantime, Berluti’s vision has also come to fruition: As shippers have begun to
weary of the duopoly’s practices and to seek alternate remedies, the regional carriers’
value proposition has never seemed more relevant.
DHL’s exit “would become the most important event in the history of the regionals,”
said Berluti, who co-founded his firm in 1983.
