Dive Brief:

• Smaller U.S. parcel carriers nearly doubled both their package volume and revenue in 2021, outpacing the growth of the largest delivery companies, according to the Pitney Bowes Parcel Shipping Index.
• Carriers in the 'Others' category — or those besides the Postal Service, FedEx, UPS and Amazon Logistics — grew their combined volume by 94% YoY to 400 million parcels, per the index. Their combined revenue grew 95% YoY to $3 billion.
• The top four carriers still dominate the U.S. parcel landscape, as they make up around 97% of market share by volume. However, other carriers collectively surpassed the market's overall volume growth (6%) and revenue growth (16%) last year, according to the index.

Dive Insight:

Interest in carrier diversification has increased with higher e-commerce volumes amid the COVID-19 pandemic, leading to capacity constraints and added charges from FedEx and UPS.

Smaller carriers weren't in a strong position in 2020 to immediately take advantage of the heightened interest, but they made network investments that paid off the following year, said Gregg Zegras, executive VP and president of global ecommerce at Pitney Bowes. With newfound capacity, smaller carriers are now receiving a larger share of shippers' parcels, according to the index's data.

Shippers continue to work with a wider mix of carriers this year. The average number of carriers on a shippers' account was 4.96 in April 2022, up from 4.34 in April 2019, according to project44's State of Parcel report.

"I think there's almost no retailers that I can think of that are now single-provider models where I give all of my business to FedEx or I give all of my business to UPS," Zegras said. "I think the multi-carrier strategy is now fully deployed."

Alternative carriers have capitalized on higher demand by pursuing growth through service expansions, either organically or through acquisitions. LSO expanded into five states last year, with further growth expected in 2022. LaserShip and OnTrac announced in October they would link their delivery networks together as part of a merger agreement, offering shippers service in both the eastern and western U.S.

In the short term, the combined company will offer a transcontinental service in which volume can be transported and delivered across the country "just like a national parcel carrier," LaserShip Chief Commercial Officer Josh Dinneen said in an April webinar. But the company is also reviewing other areas of the country it could eventually service.

"Not only will we be in the major metro areas of Texas, but you'll hear likely things in Louisiana and Chicago and St. Louis and Kansas City, etcetera, as we're going to be doing a pretty big splash in 2023 as we look to fill out the white space in the middle of the country," Dinneen said.

Commenting on the Lasership-OnTrac deal in an October earnings call, UPS CEO Carol Tomé said it's "game on," adding that she has a "great amount of respect for" new LaserShip CEO Mark Holifield.

"There's a demand-supply imbalance and everybody wants a piece of the pie, and so these regional players certainly want a piece of the pie," Tomé said of the U.S. small package market.

The long-term outlook for parcel delivery growth has become cloudier since that call, as UPS and other carriers have reported softer-than-expected volumes during peak season and the early part of 2022. Pitney Bowes forecasts U.S. parcel volumes will be between 25 billion and 40 billion by 2027, compared to 21.5 billion in 2021.