July 2023 — The rapid growth in e-commerce has dramatically changed consumer buying habits and created expectations for quick shopping and delivery. The prospects of a UPS strike, however, could upend those “always on” shopping habits and strike a blow to the upcoming Back-to-School shopping season.
The Teamsters union representing 340,000 UPS warehousing, transportation and delivery workers recently announced plans to strike if new contract terms are not met by July 31, when the current contract ends. A strike would set off what could be the largest U.S. labor strike in decades. As UPS fulfills about 25% of parcel deliveries in the U.S. — or approximately 20 million packages a day– a work stoppage could have a significant impact on the flow of goods across the country. While the strike may still be averted through ongoing negotiations, retailers are preparing as they face the critical back-to-school and holiday shopping seasons.
Labor woes push against strong e-commerce growth
The UPS labor dispute is the latest in a series of labor issues impacting the country, as many employee groups ask for higher pay and improved working conditions to compensate for their increased work load during the pandemic. Many are tracking revenue gains by UPS and other logistics companies and asking for higher compensation. The UPS strike announcement comes on the heels of work stoppages by longshoremen and port workers at West Coast ports and a threatened strike last year by U.S. rail workers.
The 12-month trailing profits at UPS rose 30 percent between Q4 2020 and Q4 2022, according to financial date company Macrotrends. Since the last five-year contract achieved by the Teamsters and UPS in 2018, the company profits increased to $11.5 billion, due in large part to the surge in online shopping during the pandemic. UPS and other shippers are now seeing a modest decline in activity due to a softening in the market, but activity levels are still notably higher than before the pandemic.
UPS workers last went on strike in 1997 in a 15-day walkout that was devastating for the company. While some experts predict that a short strike would be less severe than the strike in 1997 due to the many shipping alternatives today, it might still disrupt the supply chain at a critical time for retailers. As millions of consumers rely on package delivery for clothing, food, electronics and other goods, a strike would bring a large portion of the economy to a standstill. It could also have implications for future labor issues, as unions are trying to organize Amazon workers and those at Starbucks and other companies.
See this Avison Young article for more details.
