Interview – UPS to focus on diversification, CX and growing markets following tough 2023

Diversification, customer experience and a focus on fast-developing markets such as India will help drive growth at UPS over the next year, a top manager told CEP-Research, following a tough 2023 with declines in profits, revenues and package volumes, leading to job cuts and business rightsizing.

Interviewed at The Delivery Conference in London last week, Sahil Jaggi, UPS District Marketing Director for the UK, Nordics, India and Ireland, said that 2023 was a very challenging year for the carrier with revenue declines of around US$9 billion, but he stressed that the firm is ready to tackle 2024 head on to “come out stronger.”

“UPS has a history of close to 117 years and during that time, the firm has experienced a lot of really challenging environments and has continued to be successful because of the fundamentals of the business, one of which is to always ensure that the basic needs of our customers are being met. As long as we stay true to those fundamentals, and pivot to meet and overcome market shifts we will come out stronger,” he explained.

The “pivot” Jaggi referred to relates to the news announced by UPS in January that the business will undertake several cost-cutting initiatives this year including plans for up to 12,000 job losses as part of its strategy to right-size the company for the future.

COVID impact

According to Jaggi, who spoke during a panel discussion on “Bouncing back and laying the groundwork for growth” at The Delivery Conference, UPS’s results in 2023 were partly due to the lasting impact that the COVID-19 pandemic has had on the retail and logistics sectors.

“We were one of the fortunate companies that could operate during the lockdowns in 2020 and 2021,” he said. “We flexed our network to help keep the world connected. This obviously gave a boost to UPS. However, post lockdowns in 2022 and 2023, people started returning to stores and buying preferences changed, with the macroeconomic environment also putting pressure on consumers’ spending habits.

“Due to this, a natural correction hit the market, which impacted us, as well as the broader retail and logistics sectors. This contributed to our tough 2023 and the negative results we recorded,” he added.

However, there were some “bright spots,” according to Jaggi. “The pandemic really accelerated the roll out of omnichannel retail and out-of-home (OOH) delivery,” he said. “Now we are seeing a true convergence of omnichannel retail and delivery, as highlighted at The Delivery Conference. People are buying in store, online, or on their devices, and having goods delivered to the store, their homes or to an OOH delivery point. COVID-19 really helped the e-commerce industry evolve in this respect.”

Omnichannel delivery

UPS plans to continue expanding its own OOH network in 2024 to meet the needs of omnichannel delivery. The company currently partners with a diverse range of locker and parcel shop operators in its Access Point network and announced many new deals last year adding extra locations as part of its European expansion.

“We also opened 700-800 new Access Point locations across Norway last year,” Jaggi adds. “We are in particular looking at expanding our locker network through partnerships as we believe this is an extremely convenient delivery option for consumers.

UPS is also working with its own customers to help them improve delivery options at checkout. The carrier, for example, recently partnered with Liverpool Football Club to provide alternative delivery options in its online merchandise shop. “There is now store delivery, fast express delivery, standard delivery, etc,” explained Jaggi.

“Providing checkout options can really help consumer engagement as they can chose the service that best suits them,” he continued. “It’s important for retailers to remember that it is not just about sales, leaving a lasting and positive experience is also important. We will continue to look at how we can add those types of partnerships with other e-commerce companies and in turn help them improve their customer experience.”

Cross border growth

Jaggi also highlighted how UPS will focus on supporting its customers diversify outside of their home markets in 2024. “In the UK, for example, which is the biggest market my job covers, more and more companies are now looking at shipping into Europe again, so we will support them with that. The buying habits of the end consumer are also changing, and they are looking at purchasing goods cross border. This creates opportunities for businesses to diversity outside of their existing markets and revenue streams,” Jaggi explained.

Earlier this year, UPS announced the launch of a range of new technology-driven, next-generation brokerage services, including UPS Export Assure and UPS Paperless Invoice, designed to help businesses with cross border and to make it easier for its customers’ packages to meet the different customs requirements worldwide.

The company has also recently relaunched its Worldwide Economy service, which provides a cost-effective five-to-eight-day delivery time for D2C businesses going from the UK into the US and other major European and Asian markets.

“This product provides a good balance between businesses growing and accessing new markets at a reasonable shipping cost, and it helps them create that scale which can eventually be used to invest in those markets,” Jaggi explained.

India growth

Another key growth area for UPS in the coming year is India, according to Jaggi. “This is being considered as the next frontier of growth,” he said. “It has the fastest growing major economy in the world, with a 6-7% GDP growth rate and recently crossing the US$3.5 trillion market. It also has one of the largest populations with buying behaviours starting to align a lot more with established markets. This all creates huge opportunities, not just for logistics but for all businesses.”

UPS has made several strategic investments in India in recent years to strengthen its presence in the country. One of the most notable was its joint venture with InterGlobe Enterprises, the biggest shareholder in India’s largest passenger airline, which saw the 2022 launch of MOVIN, a new logistics brand to serve the needs and demands of the fast-paced Indian market. 

“MOVIN is focused on helping businesses fulfil their domestic transportation needs, and to date, the business has been performing extremely well,” explained Jaggi. “Thanks to this new venture, UPS’s network now covers 49 cities in India. We also opened a new gateway facility in Bangalore in 2022, which enables us to deliver better connectivity both inter-regionally and inter-continentally.”

UPS has also invested around US$20 million in a new tech centre in Chennai in India, which provides a space to nurture local talent in the country who will help enhance the shipping and logistics firm’s global technology capabilities.

Jaggi also highlighted how the Indian market could become even more appealing to businesses in the UK if a new India-UK free trade agreement is approved. “That that would open a pretty substantial trade lane for businesses to then start sourcing and selling into,” he added.

Other investments

In all the markets covered by Jaggi – India, the UK, Ireland and the Nordics – UPS will focus on healthcare, tech investments, capacity improvements, diversification and new services overall in 2024.

“Healthcare is a very important pillar of our organisation,” Jaggi said. “It now represents a US$10 million revenue stream for us, and we plan to continue to drive that forward. The new acquisitions –MNX Global Logistics and Bomi Group – will help us achieve this, along with the new healthcare facility in Dublin, Ireland, which is set to open in the next few months.

“Aside from healthcare, we are investing in our sortation capabilities and other technologies, including partnering with Aurrigo to see how autonomous vehicles can be used in our airport facilities. And we have recently invested in UPS Symphony, a freight tech tool that basically provides the opportunity for a lot of our customers to be able to manage their supply chain, warehousing and distribution, as well as final mile and delivery, at their fingertips through software," Jaggi added.