UPS and FedEx customers regain the upper hand in the delivery price battle. Industry statistics and interviews with seven price negotiators show that U.S. retailers and other delivery customers readily gain reductions from UPS and FedEx for the first time in more than four years.

That’s a big change from 2021 and the first half of 2022, when UPS (UPS.N) and FedEx (FDX.N), flooded with online buying from the early epidemic, rejected discount requests and chose the most profitable consumers. As demand drops, those firms are battling to fill vehicles.

Except for USPS and Amazon.com, UPS and FedEx dominate U.S. doorstep delivery with about 50% market share and $191 billion yearly revenue. They have raised regular rates by over 30% from 2019 through 2024 and typically match prices.

“They have to fight for every package right now, it’s great for shippers,” said former UPS pricing negotiator Kenneth Moyer, LJM Consultants partner and delivery consumer advocate.

Deyman Doolittle, co-founder of data-driven consulting business ShipSigma, which helps companies decrease shipping costs, said muted demand provided a “very juicy” environment for customers to save. Consultants wouldn’t name clients.

According to the TD Cowen/AFS Ground Parcel Freight Index, online retailer-favored ground delivery rates fell below 2022 in the second quarter and are expected to fall into the third quarter. A full-quarter loss would be the first since the index gathered year-over-year data in January 2019.

FedEx said it strategically adjusts customer pricing depending on volume, business segment, and package type.

UPS stated that discounts are not the only method to earn back revenue lost during its heated Teamster contract discussions this summer. The world’s largest parcel delivery company said it negotiates prices to attract high-margin or high-volume clients and discourage high-cost deliveries.

Some online shops have cut expenses due to the new carrier stance, lowering rates for buyers. Both UPS clients, Macy’s (M.N) and Rent the Runway (RENT.O), informed Wall Street they were saving money owing to freshly renegotiating delivery arrangements, including a 50 basis point cut in Macy’s second quarter. Both declined to speak for this story.

Moyer said his business saved a UPS customer $6.8 million due to the unusually rapid power shift. Moyer said an identical customer had a $500,000 discount denied earlier this year. Mark Taylor, senior director of transportation consultancy at Korber Supply Chain, said shippers often save 8%–12% off list pricing. Companies experienced comparable reductions pre-pandemic.

A former FedEx Ground project manager, Taylor, said a return to discount levels “feels like a windfall,” but they won’t balance years of price spikes.

3-DECADE MISMATCH

A widening supply-demand gap threatens carrier profits. Satish Jindel, head of transportation consultant ShipMatrix, said UPS, FedEx, USPS, and Amazon can deliver 110 million items daily, but their customers only send 70 million. This is the worst mismatch in at least three decades.

The TD Cowen/AFS Ground Parcel Freight Index predicts 0.55% lower third-quarter ground delivery rates than last year. Michael McDonagh, president of package services at AFS Logistics, said such a shift may not affect small firms but can save large ones.

He noted that air-based express package delivery discounts are rising, with prices likely to fall 1.5% from the second quarter but jump 1.9% from a year earlier. Pricing advisors claimed FedEx discounted earlier and more aggressively than UPS due to the demand decline.

Before its contract with 340,000 International Brotherhood of Teamsters members expired on July 31, UPS was also boosting business. Pricing consultants said UPS’s effort to reclaim the 1.2 million shipments per day consumers routed to FedEx, USPS, and regional rivals last summer ahead of a Teamsters strike increased pressure. FedEx says it can maintain the 400,000 parcels per day it gained during UPS discussions without decreasing pricing.

Experts doubt it, especially as UPS covers early termination expenses for FedEx clients. “Due to UPS’s aggressiveness, FedEx isn’t shy about winning business either,” says TransImpact’s vice president of sales, Jey Yokeley.