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E-Commerce spike helping shipping leaders

Maybe the shipping industry was waiting for a rainy day after all. According to a Reuters report, bad weather is one of the factors contributing to a s...

Freddie Pierce
|May 16|magazine7 min read

Maybe the shipping industry was waiting for a rainy day after all.

According to a Reuters report, bad weather is one of the factors contributing to a spike in online sales and the subsequent shipping boom that’s being experienced by industry leaders UPS and other shipping and logistics companies.

Increasing fuel costs and inclement weather are making online shopping a greater alternative than ever before, as online sales jumped by double-digits in the first quarter, which was good news for UPS.

“It is a big deal. It’s a growing portion of the business,” Dahlman Rose & Co. transportation analyst Jason Seidl told Reuters. “They’ve made sure they [UPS] can integrate themselves into a global e-commerce supply chain.”

UPS and other logistics and shipping leaders were expected to be hurt by the spike in fuel prices and weather interruptions, but instead the potential problem has turned out to be a boon for UPS and others. UPS and others modestly raised pricing for fuel surcharges to mitigate cost pressures, and so far consumers aren’t resisting.

First quarter online sales in the United States rose 12 percent from a year ago to $38 billion, according to comScore.

"While we would expect online buying to dampen slightly if gas prices continue to eat into discretionary spending, it's clear that e-commerce has become a mainstay in consumer behavior, driven by the attraction of both lower prices and convenience," comScore chairman Gian Fulgoni said in a statement.

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Online spending and e-commerce continue to be driving points in the future, and UPS is particularly excited with the potential in the growing online business.

E-commerce "continues to be one of the long-term growth drivers in our industry," UPS Chief Financial Officer Kurt Kuehn told Reuters. "Our B to C business, or direct to consumer business, is about a third of the shipments we have and that has grown historically.

"Even those retailers that have a very substantial brick and mortar process are aggressively pursuing ways to complement that with Internet and direct capabilities."