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Episode 43: What do brands do in the event of a parcel strike?

Sippin' & Shippin'
Sippin' & Shippin'
Episode 43: What do brands do in the event of a parcel strike?
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Tanya Phipps|July 7th, 2023

As the country and economy continues to recover from the structural and economic impacts of the Covid-19 pandemic, the e-commerce industry has finally started to level set and adjust to the new competitive landscape of hybrid businesses saturating the market.  The Sippin’ & Shippin’ crew talks all about it, as the e-commerce community prepares for this upcoming peak season.  What are some early projections for this very pivotal time for businesses, and what should brands be looking for as they plan ahead? Also, looming within the business community, is the very hot topic of the potential UPS strike.  How likely is this parcel strike, and in the event it does happen, how can brands prepare? What’s a good contingency plan? We get all the deets and insights from our very own, special guest and industry expert Sean Kim, VP of e-commerce experience and global parcel strategy.  Listen today, as this episode is one you don’t want to miss! 

Timestamps: 

1:36 Meet Sean Kim 

3:11 Peak planning needs to start early 

5:09 Projections for this year’s peak season 

8:32 “Shoot for the moon” 

11:09 Should you expect peak season surcharges? 

23:50 The scoop on other carrier options 

26:42 If a strike happens, what should you do? 

30:11   Other implications of a strike 

Transcript

Brian Weinstein: Welcome everybody to Sippin’ and Shippin’. I’m your host, Brian Weinstein. We’ll be kicking it here every other Friday, quenching your thirst for an insider’s take to enhance your customer experience. So grab your drink of choice, kick back, it’s Sippin’ and Shippin’ time. All right, welcome everybody to another episode of Sippin’ and Shippin’. I am your host, Brian Weinstein and with me in support because I am on the injured reserve, Caitlin Postel.

Caitlin Postel: That’s right, Brian. Lucky for you, we came to terms. I’m not striking. I’m sitting in an air-conditioned office and happy to be here to support. What’s going on? How you feeling?

Brian Weinstein: Thank you. I’m feeling okay. I’m feeling okay. All things considered, my little weekend mishap aside, all in good shape. All right. Then this week, Caitlin, this is our first repeat guest, right?

Caitlin Postel: It is. A very special repeat guest at that.

Brian Weinstein: Yes. Our very own Sean Skim Shady. What’s happening, Sean?

Sean Kim: Hey, what’s going on guys? I didn’t know I was your first repeat guest. Thanks for having me. Glad to have the title, the honor there.

Caitlin Postel: Parcel is just that sexy, Sean, and you know it.

Brian Weinstein: It is.

Sean Kim: Oh, so sexy. So sexy.

Brian Weinstein: That’s why people tune in. They tune in for sexy and parcel is sexy.

Caitlin Postel: For the parcel. Tune in for the parcel.

Brian Weinstein: Exactly.

Sean Kim: It’s sexy. But not only is it sexy, it’s really, really important too.

Caitlin Postel: There you go.

Brian Weinstein: For those that don’t know, I’ll let Sean intro himself, but he is our guru of everything small parcel. He is what keeps our small parcel network running effectively for our customers. Sean, why don’t you give a little background for those of you that didn’t tune in to your first episode.

Sean Kim: Yeah, thanks Brian. My name is Sean Kim. I’m the Vice President of E-Commerce Experience and Global Parcel Strategy for Ryder E-Commerce by Whiplash. My role is really here to help our customers specifically with their customer experience when it comes to the delivery of packages, the small parcel component of it, as well as the return of those packages coming back to our network. Those are the tangible touch points between our brands and their customers. As simple as it might sound, there’s a significant amount of strategies to make that happen. My background, I’ve been doing e-comm for over 20 years, specifically with e-commerce companies like zappos.com, amazon.com, and a slew of others from traditional e-commerce to various types of subscriptions e-commerce. My focus has always been just in this space right here of helping strategize on your customer experience with delivery. I get the honor to work with our customers, some incredible brands, on how to help them with their strategies, whether it be from a marketing thing that they want to do or just overall brand experience. Thanks again for having me.

Brian Weinstein: No, no. Love having you on. Love the industry discussion. I think for us, let’s just address it, it’s funny to start thinking of peak on July 5th. What in your experience is the best time? I mean, we typically start around now with most of our customers, right?

Sean Kim: Yeah. Maybe I might be divulging a little bit too much and giving away a little bit of our secrets here. But anything for you guys.

Brian Weinstein: Give us the tea, man. Give us the tea.

Caitlin Postel: I like how you queued that up. Build, build, build. Spill it, Sean.

Sean Kim: Here we go. One of the things that we are very, very cognizant about here at Ryder E-commerce is the ability for our customers to have their packages delivered in a timely manner at peak season. We’re talking about October, November, December, specifically between Black Friday and Christmas. That’s the very crucial time. In order for packages to get into the network, you need to make sure that there’s enough capacity on the pickups. One of the things that we do is we work very, very early, almost six months in advance. We’ve already started peak planning. But we work about six months in advance. With the carriers… We work with our customers on what their forecasts and plans are, and then we work with the carriers on that to try to secure that capacity. During that peak season piece, we want to ensure that capacity is first come, first served on the pickups. There’s only a limited number of drivers and trailers that they have capacity for. Our little secret is that we work with the carriers very aggressively, work with our customers very diligently on trying to secure that capacity come peak season.

Brian Weinstein: Sean, just before we even start to address the gigantic, brown elephant in the room, we won’t even go there yet, 2020 was obviously COVID year and things were super spiky for e-commerce. Then 2021, it seemed to be like the height of all things’ congestion in the small parcel network. 2022 was a little bit better. Again, aside from what we’re going to talk about in a few minutes with UPS, just in general, if that weren’t a situation, what is your projections for this coming peak season?

Sean Kim: That’s a good question. I mean, we’re seeing very aggressive numbers from our customers already. I think everybody’s very hopeful. Let’s just be honest, this year has not been the strongest year for e-comm. I think to your point Brian, and this is something that we had discussed internally, we knew that… During the COVID period, e-comm was at all time high. People were locked in their homes, couldn’t do anything. E-comm was through the roof. Then if you think about consumer behavior, as we started coming out of this pandemic and we were let out on probation, we’ll call it, stores started opening up little by little and started making it more convenient. We started to go out a little bit more and venture a little bit more, trying to do more the brick-to-mortar shopping. I think 2023 is just really the time when very rarely now do you see any stores that require masks, that require limited number of people inside stores. We’re just seeing a huge influx of consumers going back to brick-and-mortar.

Brian Weinstein: Hey Sean, I’m sorry to interrupt you, but just a question though. Is it just a slowdown in growth? Is it really a pullback in the volume numbers? Or is it just a slowdown where everybody got used to from ’20 to ’22, 20 plus percent growth if not more, and now we’re more on a normal level?

Sean Kim: I think it’s more along the lines of it’s a rebalancing. There was a full swing to e-comm when we were forced to, and now that brick-and-mortar’s opening up, we’re starting to see a rebalance. That feeds the trend of e-comm companies that when you have these digitally native brands and a lot of them are now working directly with brick-and-mortar retailers, trying to get more into that arena to become really more omnichannel. I think omnichannel is definitely a strategy, but also we’re seeing a lot more consumer spend in the brick-and-mortar retail side of things. But overall, I think consumer spending is down. We can blame economical factors and inflation and some of those things, but e-commerce is still very, very strong. I do think that as brick-and-mortar retail, we can have a whole separate conversation on the brick-and-mortar strategies, things that are happening in the brick-and-mortar side.

But as consumers start to go back and they start to see, “Oh, this is really great. Let me check what’s online,” not necessarily price comparisons, but also just inventory levels. Example, you might go into a Foot Locker. You might look at a pair of Nikes and say like, “Oh, do you have this in size 10?” They might say like, “Oh, we don’t have it. We can get it from another store.” That consumer’s already walking out the door looking at nike.com and saying, “Okay, boom, there it is. I’m going to place the order right now.” I think we’re starting to see a lot of that behavior coming on. I think that’s ultimately going to fuel the next wave e-comm growth.

Caitlin Postel: The diversifications of channels is something that we’ve spoken about this year with guests. I guess the digitally native rocket ship has run out of COVID fuel. We see that folks are going in ways that they never thought they would before. How are you working? Getting back to peak planning. No one has a crystal ball. How are you working with the brands and more importantly, the carriers? When we always say operationally to our brands, we know that months out these are going to be wrong, but as we creep closer to that date, we should tighten up those projections. How are you working with both, finding that balance between brand and carrier to diversify or work with the right people to make sure those packages are allocated for and going to be able to really get that customer experience that you’re promising to our brands?

Sean Kim: Yeah, I guess I’ll let you in. Maybe it’s a little bit of a secret sauce of what we do, but maybe not. There is no crystal ball. Generally what we do is we ask our brands to shoot for the moon. What do you need to do? What do you want to do as a business? Because that question right there is going to help drive the marketing efforts that are going to take place later this year. If they’re like, “We got to move all this inventory.” That means they’re going to be, for lack of a better word, I don’t know if it’s desperate or if it’s just more aggressive.

Brian Weinstein: Aggressive.

Caitlin Postel: Aggressive, yes.

Sean Kim: Aggressive on moving the inventory. They might have more sales and bigger deals and stuff like that, which ultimately leads to volume and capacity needs. We ask brands to shoot for the moon. Then what we’ll do is we work again very closely with our brands. We track it week over week, month over month leading up to it. Then as every month goes by, we look at the forecast again, readjust, and then try to fine-tune that. It’s not a perfect science, but we try to fine-tune it. Ultimately what ends up happening is we work directly with the carriers and saying, “Okay, we may not need as much capacity coming out of this location, so we may cut back.” Or we might say, “There’s going to be a huge shift from ground to air during this time period. This is what we’re seeing.”

It’s really just, to your point, Caitlin, it’s just working very closely with our brands and the carriers to ensure that we’re not over committing with the carriers. Because that ultimately costs them money and we don’t want them to waste money and we don’t want to be selfish with the capacity. We just want to be very realistic. Then obviously working with our brands to ensure that their forecasting is much closer on point based off of historical trends.

Caitlin Postel: Yes, makes a lot of sense.

Brian Weinstein: Sean, at this stage, especially for peak, and I know this is going to vary, but just for a typical parcel customer, has peak surcharges become a norm? Is that a guaranteed? Or every year they’re making decisions?

Sean Kim: The carriers are always going to say every year it’s going to be TBD, but I think it’s become the norm. All it takes is one carrier to say, “We’re going to charge peak surcharge,” and everybody else follows suit. It’s really unfortunate because I feel with year-over-year increases in rates should be covering whatever that capacity demand is. But ultimately I feel that the carriers are just leveraging this to maybe cover some additional costs. But I think it’s just feeding the margin.

Brian Weinstein: Right. It’s a slippery slope for a brand that has to budget.

Sean Kim: That’s right. The big challenge here is nobody really knows what the peak surcharge is going to be come this… if there’s going to be peak surcharge and how much it’s going to be come this big season because of the way that the carriers calculate one period to another period. As a brand, it’s very difficult to budget like, “Oh, I should expect 3:50 per package or $4 a package, $5 a package, whatever that might be.” It’s really hard for them to budget for that.

Caitlin Postel: When do those get rolled out typically?

Sean Kim: Usually the week of Black Friday.

Caitlin Postel: Nice. Just in time?

Sean Kim: Yeah, just in time. Some carriers will start November 1st, but usually the week of Black Friday. When I was talking about two different period comparisons, they’ll say like, “Okay.” They’ll take some week earlier in the year and they’ll say, “We’re going to use that as a baseline. And come peak season, if your volume exceeds like 100% or 150% or 200% of that previous period, then you’re going to get assessed this peak surcharge.” What carriers say and do is they take a week in June when e-comm is at an all time low and say, “That is your baseline.” Then they take the week right before Black Friday and say, “This is your new baseline.” That’s how they determine what they’re going to charge you for the peak surcharge.

To me, it’s a little bit… I can understand just a flat number for every package going through peak, but no, it doesn’t work like that. It is very difficult for us to be able to communicate to our customers what to budget for. Again, we use historical data and when customers ask us, unfortunately, we had to say, “Well, last year and previous years it was this. You might want to start planning for that, but it could be more.”

Brian Weinstein: Yeah, it’s like I’m on a weight loss bet with wall puff right now. I weighed myself right after the biggest meal of the day. This way when I go and weigh in next time I’m lighter.

Caitlin Postel: Very tricky.

Brian Weinstein: Right, exactly. I’m like the parcel carriers. I’m asking this without really knowing the answers, but are the brands passing those peak surcharge costs along to the consumer?

Sean Kim: Historically, we haven’t seen that, and I can understand why. For the brands, they don’t want to interrupt the checkout flow. They want their customers to go through and select the goods that they want. They want to be able to offer free shipping. I think it’s great that brands want to do that. For a consumer, it’s great to see free shipping. Even if it’s a certain minimum, it’s great to see that. But now you go through the process and you’re like, “Oh, by the way, now there’s this little peak surcharge. We’re going to give you free shipping, but there’s this other surcharge because it’s peak season.” That could interrupt the flow to check out. Now a consumer can say like, “Oh, I’m not sure I want to do that. I can order from somewhere else potentially like Amazon or a company who’s not going to charge me.” And then just abandon the cart. I think for brands, they’re stuck between a rock and a hard place in this, when it comes to peak surcharges.

Brian Weinstein: Well, I guess you could probably build your parcel fees up a touch throughout the year to build a war chest to be able to support that. Look, it’s an absolute fall to the bottom margin erosion for a brand to have to absorb that. Somehow, some way it only makes sense if the carriers are going to continue to provide it or charge it. The brand somehow or another have to claim that back from the consumer. Otherwise, they’re going to go through some margin erosion, which can impact them in other areas.

Sean Kim: Yeah, 100%. I mean, hats off to the marketing folks at all these companies. Because they have to deal with having all this understanding of what’s going to come up this peak season. Figuring out what discounts they’re going to be able to offer. What sales they’re going to have. Then balancing that with how do we continue to acquire new customers throughout the year leading up to peak season. Knowing that potentially there’s a peak surcharge coming, the company needs to hit certain margins. They need to prepare for that erosion, whatever it might be. It’s very challenging for folks in marketing. Got to tip the hat over to those folks who are making it happen and growing.

Brian Weinstein: All right, just shifting gears to, if it was easy, everybody would do it. We have all these great plans laid out, and then we have this potential UPS strike. I’m not sure when the final decisions are coming, how that’s working out. I know this is a union thing with UPS right now. What are again, forward-looking statements? We don’t have any crystal balls. We don’t know what’s going on exactly. But what are you hearing is going on in the market right now?

Sean Kim: Maybe we’ll start with the facts. There’s a negotiation that takes place between the International Brotherhood of Teamsters and UPS every five years. People should not be thinking like, “Oh my God, this is just out of the blue.” Every five years there’s an agreement. Once UPS and the Teamsters come to terms this year, come 2028, there’s going to be another negotiation. First things first, people need to understand that this is not some random thing where they’re just saying, “The work conditions suck. We’re not going to do this anymore.” It’s contract renewal time.

The current contract expires on August 1st. There are a lot of terms that the Teamsters would like UPS to meet. Essentially the Teamsters’ positions in some is, “You guys are killing it. You guys are making a significant amount of money. We’re doing all the work. We have not so ideal work conditions. We don’t make as much. We want a bigger piece of that pie.” That’s what’s going on. There’s a lot of things like air conditioning in the vehicles, which UPS has already agreed to. I think they’re spending $400 million. They’re investing into retrofitting all the trucks with air conditioning. Obviously, completely agree with that. That’s where things are at. There’s just a lot of media buzz this year around this UPS strike. Is it concerning? Yes. Absolutely, it’s concerning. They deliver… What is it? Something over 20 million, maybe 24 million packages a day domestically.

Brian Weinstein: What is that as a percentage of the overall packages, would you guess?

Sean Kim: Probably about 6%. Six is what we’re reading. It’s significant. It’s very, very significant. I will say, knowing now that the contract is set to expire in August 1st, the Teamsters has already agreed, I mean, why wouldn’t they? If they can’t agree to terms, they’re going to go on strike. If they don’t have a signed agreement August 1st, they’re going to go on strike. They’re going to stop working. Go on strike. That’s going to be about 340,000, probably more than 340,000 positions, that are just going to say we’re done and they’re going to picket.

Caitlin Postel: Huge.

Sean Kim: Huge impact.

Brian Weinstein: Yeah, huge impact.

Sean Kim: Yeah. Kind of talking, when we were talking about peak planning and how we operate the business, we look at historicals. Will there be a strike? My gut tells me, no, there won’t. If you just look at the historicals, last time there was actually a strike was 1997, and the lesson learned from that strike. They went on strike for 15 days and eventually they came to an agreement. That 15 days cost UPS over $600 million in business. In 15 days. That’s an expensive lesson to learn. This is back in 1997. Now think about how much e-comm was happening in 1997. This is early days of Amazon. Now we look at like what’s going on with e-comm? It’s going to be significantly… The dollar impact is going to be significantly higher. But that was the last time when there was a strike. There was contract negotiation in 2002, 2008, 2013 and 2018. Did you guys know that? I don’t think anybody knew that.

Brian Weinstein: No.

Caitlin Postel: I did not.

Sean Kim: Yeah. It’s been quiet.

Caitlin Postel: Yeah. I mean, I’m not too surprised though that these things are coming up. Every five years. That’s a long time. These are probably the five most impactful years I would think. I mean, you’re the parcel expert, but so much has changed for these folks and for UPS as an organization. I guess we just get the buzzword and the media input. I’m sure they’ve been having these discussions since January, I would imagine.

Sean Kim: Yeah, probably even longer than that.

Brian Weinstein: Again, not to flip to the other side and be on the cynical side, but everything is just posturing for negotiation until it’s no longer posturing, and then you have to execute one way or another. You never know how these things wind up down the end, down the end of the path, or if it just gets cut off. I actually get a little nervous, Sean, when you say the last time there was a strike was 1997, because I just see it as little bits of history repeating. Eventually it’s going to come back. It’s going to happen. I do agree with you, Caitlin. It’s been such a transformative time, especially in the small parcel industry. It depends on how much does UPS want to give back. There needs to be that balance.

You need to run an organization, appease shareholders, but you also have to remember who’s really out there driving the revenue, literally in this case, driving the revenue. It’s a very precarious time. I don’t want downplay it and say, “Hey, it’s going to get done.” I’d like to think because negotiations for the last however many years, 26, have been smooth that they can get to that place again.

Caitlin Postel: I mean, 6% is a lot. Is there even room in these other networks?

Sean Kim: No, no. There’s a big impact right there when we talk about what happens if the strike does occur. The one thing from the Teamsters’ side of things, it makes complete sense. I feel like the leader of the Teamsters, Sean O’Brien, really is focusing on, Caitlin, to your point, it’s been transformative over the last five years. He’s looking at the next five years. Once they sign this agreement, it’s going to be the next five years that they’re going to be locked into this. He wants to get what’s best, do what’s best for the union. I completely can agree with that. UPS, they’re really on this path of profitability, reporting to shareholders and everything. The more that they give the Teamsters, they’re looking at that margin erosion. It’s going to be a lot more expensive. The cost of business is a lot more expensive for them.

I’m confident though, that they will find a middle ground. Brian, to your point, I think that a lot of this is just positioning. A lot of it is just making people aware of what are some of these terms that they’re negotiating? What is it that the Teamsters want? I think ultimately they will find a middle ground. But if they don’t find a middle ground and they do strike, what happens? I will tell you right now, for all listeners of Sippin’ and Shippin’, their FedEx has already come out and proactively said, “We cannot take the volume.”

Caitlin Postel: Straight out.

Sean Kim: Straight out and said, “Any brands who are trying to switch over to FedEx right now because of this potential…” These quote unquote, “UPS brands” now wanting to try to negotiate with FedEx and shift over to FedEx, FedEx has already stated, they’re not going to play ball. They can’t do it. For good reason. They need to protect the integrity of their network based off the volume that they already have with customers. They only have a limited number of open capacity. They need to reserve that for their existing customers as volume grows. Now all of a sudden you have 20 million packages wanting to make the shift over to FedEx. It’s going to completely slow down their network. It’s going to disrupt the integrity of that network. It’s going to make a lot of brands unhappy. They do not come out in a good light if they accept this, and it ruins the integrity of the network.

I understand FedEx’s position on this as well, why they wouldn’t want to do it. We’ve seen it in the past where you have this influx, if we talk about the pandemic times. All of a sudden they’re expecting this much growth, this much capacity needs, and all of a sudden, boom, it spikes, and then it brings the network down. They have packages on trucks just sitting around. They can’t get packages on trucks. Everything just comes to a crawl, and people are really unhappy. They’re looking to protect the integrity of the network, which means now a lot of brands are going to start shifting over to the US Postal Service.

The Postal Service, they are looking obviously for profitability as well, but they won’t be able to take the capacity. They’re not going to be able to take it. A spike of 20 million packages, you are going to see some bleed over into these. It’s just natural. A lot of our brands who we’ve helped position to not be a single carrier, have a single carrier solution. If they’re using FedEx and UPS, you’re going to see a natural transition of some of that additional volume going FedEx from UPS as we get closer to August 1st. But companies who are trying to make a massive, what I call a panic shift, are really going to be in trouble.

Brian Weinstein: I’m curious because I’ve said this before, we’ve actually talked about this in previous episodes, necessity being the mother of invention. If this were to come about, and if there were a strike, where do people turn? What are their options? Because I know certain networks are not set up for the heavier weight packages. We know DHL especially domestically, is more geared towards lighter packages. Their entire infrastructure is set up accordingly. I would imagine USPS is not that much different. Where do people go? Who’s going to be the one that steps in, or several of them that step in to absorb some of that volume?

Sean Kim: Yeah, my recommendation is for brands to start preparing messaging to their customers, particularly if they’re heavy UPS. They ship a lot with UPS. Start preparing messaging to their customers to expect no shipping or slow shipping, slower transits, and to make consumers aware of these negotiations. It’s not just like, “Oh, it’s just happening to us.” Start building the awareness. UPS has a negotiations page website. Start visiting that. Prepare the messaging, letting your consumers know there’s this potential strike, and we’re doing everything we can to shift this volume. The fact of the matter is there is no one glove fits all solution, unfortunately. It’s just too much volume.

But at the same time, there are opportunities to optimize with some of the other carriers. To your point, Brian, with certain package profiles, there are things that… So work with your customer experience team. Work with your resident parcel expert. If you don’t have one, our customers can reach out to me and my team anytime to discuss. We’ll pull data and we’ll see what the options are. But unfortunately, this is going to be, if a strike does happen, things are just going to pretty much come to a crawl.

Brian Weinstein: Yeah, exactly right. Could you imagine? One of the things, I guess, Sean, and maybe we can end on this unless Caitlin has anything else, from what I’ve read is that if there’s a package on a truck and they decide to strike on August 1st, that package will sit on that truck until that strike is over. You could, in theory, if there’s been no settlement, you should really be considering where you’re shipping, how far you’re shipping, because you need that package to be delivered by August 1st. Is that fair?

Sean Kim: Yeah. 340,000 employees who decide, “We’re done. We’re going on strike.” It doesn’t matter where that package is, whether it’s sitting on a truck at a local sortation, at the main sortation center, everything’s just going to come to a stop. Nothing’s going to move. They need the output. They need the delivery of those packages so they can fill in. Once everything stops, it just backs up.

Brian Weinstein: Is there any risk that the unions from the other carriers will honor the strike?

Sean Kim: The unions from the other… So when you look at the carrier network, UPS is very deep with the unions. FedEx has different arrangements. The FedEx isn’t really working with unions. They have their independent contractors network. It’s a little bit different situation for them. I don’t know which one is better, which one is more reliable in terms of long term. I think that their risks with both of those are business decisions they make, and they work within those realms. Where I’m going with this is not UPS is better because they work with the unions versus FedEx or FedEx is better because they work with independent contractors than not the unions.

Brian Weinstein: Just different positioning. Understood.

Sean Kim: Just different positioning.

Brian Weinstein: Caitlin, anything else you want to run past our guru before we let him go?

Caitlin Postel: No, I think it’s just pretty scary to think about. I mean, it’s one thing to be concerned about your bathing suit top that’s stuck on a truck. But this is impactful. You think about medical supplies. Things that people need to run their businesses and how it can screech and halt. We just talk about the supply chain. I think folks didn’t even know what that meant pre-COVID. I feel like it was getting to a good place. Now something like this can completely derail not just your packages, but these are people. This is 340,000 people who I’m sure don’t want to sit at home. Well, I bet that they… Do they have? They must have some type of contingency for them to be paid. I guess that’s my question.

Sean Kim: My understanding is they get some sort of payment for picketing.

Caitlin Postel: Like a strike fund or something?

Sean Kim: Right.

Caitlin Postel: Yeah, okay.

Sean Kim: Again, I think that everybody understands the economical impact, the business impact to UPS. The impact to 340,000 union members who are going to be essentially unemployed. I think everybody understands the impact. This is one of those situations, I’m very bullish on this mindset. It’s too big to fail. They have to work through this. They have to figure out the terms. UPS has the money, I believe, to meet the terms. I don’t know all the details of everything that the Teamsters are negotiating, but they have the ability to do that. The more important question is if and when a strike is over or doesn’t occur, and they finally do get to an agreement, because if they do strike, they’re eventually going to hit an agreement, when they hit that agreement, what that means is UPS has conceded at least somewhat some percentage to meet the union demands.

What does that mean to the rates? As a brand, what does that mean going into peak season. Does that mean UPS is all of a sudden going to say like, “Oh, we have spent $400 million to retrofit the trucks with air conditioning, and now we’re going to spend another billion dollars in salary increases and improved work conditions for the Teamsters.” They’re not going to just willingly say, “Okay, we’re just going to absorb all that.”

Caitlin Postel: The surcharge is going up by the minute. Build it in. Build it in.

Sean Kim: That’s what concerns me. The other thing that concerns me is when you have UPS and FedEx, they always tend to follow each other. Follow the leader. If UPS does that, it’s not like, okay, everybody’s going to switch over to FedEx, because FedEx is probably going to say, “Well, we’re going to come up with some equivalent.” That’s something that I’m trying to keep an eye on and see what’s going on. I’ve already had conversations with both companies on what is this looking like. Because I know you guys are not going to absorb this. What are you going to charge? How are you guys going to get this back from the brands? Letting them know you’re already pushing it too far. The cost of where they are today, the year-over-year increases is too significant at e-comm. You’re going to bring e-comm down. The cost of business is too high, so how much more are you going to hit that?

Brian Weinstein: Then again, necessity is the mother of invention. What comes out of this? Who continues to rise? What kind of peripheral carriers step up and fill voids and hit price points and find better, faster, cheaper ways to get it there? Because that’s the reality of it. At some point in time, there will be new options. There will be new methods.

Sean Kim: Yeah. None of those are secrets. We’re also working on other solutions that alleviate us of some of the systemic risks.

Caitlin Postel: Leave breadcrumbs.

Brian Weinstein: Kim always got some up his sleeves. Some up his sleeve.

Sean Kim: That’s awesome.

Brian Weinstein: Sean Kim, as always a pleasure. Our first repeat guest. I couldn’t have asked for a more insightful episode. Really appreciate it.

Sean Kim: Awesome. Thank you guys very much. It’s great to be back.

Caitlin Postel: Thank you, Sean. Thank you to our listeners. Make sure you tune in every other Friday at sippingandshipping.com or on your favorite podcast platform. Stay tuned on this, guys.

Sean Kim: Now I’m sipping.

Brian Weinstein: You’re sipping, attaboy.

Sean Kim: Thanks guys.

Caitlin Postel: Thank you.

Brian Weinstein: Thank you.

Caitlin Postel: No strike.

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