DEEPER DIVES: There's No Price Relief Coming To Service Providers Any Time Soon

Good Morning,

First, as always, thank you for joining.

There are a lot of changes happening in the market.

While some of hits the mainstream and gets lots of attention, there are a number of shifts happening both on the retailer and service provider landscape when it comes to last mile.

It’s already been a rough start to 2025.

It’s going to get worse. I’m sharing with you why - but more importantly to help you get what matters onto your radar (and let what doesn’t fall off).

Here’s what this issue brings:

• UniUni, USPS, Veho, Jitsu, USPS, FedEx and Amazon are all vying for more of the parcel market volume. With everyone looking to eat, what’s going to happen when there’s nothing left to go around?
  

• Target is looking to grow. A lot. What happens to the retail market when an established brand doubles down on sales growth to survive?
  

• Another Chinese retailer is entering the US. Gunning directly for H&M and Zara, what’s going to happen with even more consumer fragmentation

Why Your Carrier Choice Today Could Save Your Business Tomorrow

“We don’t want to just pick off 15, 20, 30, 40% of a customer’s volume,” Haun said. “We want to pick off 70, 80% of that volume and provide a cost-effective solution to really up to 80% of the U.S. by the time we’re done.”

UniUni’s expansion is part of a broader trend.

But is their approach truly innovative or sustainable?

Can low-cost models genuinely compete, or are they simply temporary fixes to deeper structural inefficiencies?

The quote above was from Joshua Haun, UniUni’s Senior Director of Business Development in the U.S.

It signals the company’s intent and strategic focus moving through 2025 and beyond.

But nothing they are doing is unique.

It’s actually the exact same thing that EVERY alternative last mile carrier is doing right now.

Trying to expand and secure volume before cash runs out.

Take a look at the two maps below from Veho and Jitsu.

Pretty similar.

That’s because for all of the talk of technology, AI and ‘modern solutions’, every last mile carrier works from the same core foundation.

Density.

And no matter how good your software is or how well you can optimize, nothing will make up for a poor quality of revenue.

In the above map of the greater Boston area, I’m showing you a representation of what different carriers are working with when it comes to the health of their network.

Smaller carriers like Veho are trying to expand.

There’s two reasons for it:

1. To stay relevant and capture more volume from existing customers

2. To looking more attractive to new customers and win more business

But the problem is there isn’t enough growth in eCommerce (at a new activity level) to support multiple overlapping service networks that all run on similar fixed cost models.

The sales pitch tries to get you to believe that a gigwork model + technology can make up for inherent inefficiencies in the system.

It can’t.

If you are a growing eCommerce brand or an established retailer looking to see your market penetration grow with more delivery options, don’t fall for this narrative.

Lower cost models aren’t a solution.

They’re a band-aid.

They simply allow you to take more damage before you bleed out.

And while these models thrived during COVID when no one was able to scale capacity fast enough, they don’t offer enough benefits to build your entire model on it.

Which is why you are seeing more and more of these once “gigwork” providers developing DSP programs.

Highly efficient capacitized routing is the only way that you can have any hope to survive if your primary offer to win new business is on low cost.

UniUni knows this.

And they know that in order to cover more the US population, and to capture more of a retailer’s volume, they’ll need to be able to do more transactions per hour with less people in order to support the ridiculously low charges per package they are going to use to capture attention.

But UniUni isn’t the only one doing it.

Jitsu runs a DSP program.

And so does OnTrac.

These companies have all realized that in order to support the needs of major domestic retailers, you have to be able to do a lot more packages per delivery route.

There’s only so much that you can load into someone’s personal vehicle.

Adding to this mix, you have a few other major market changes that are going to continue to put MASSIVE pressure on last mile carriers and delivery cost.

First, USPS.

They have opened up 54 markets for the new Priority Next Day service. At its current level it can service approximately 67 million Americans.

But the real ‘danger’ for other networks is the fact that they are looking to rapidly scale it up, in order to service about 90% of the US population.

And right out of the gate, USPS is setting this up to offer competitive rates, appealing to businesses of all sizes. Their goal is to secure more direct contracts with shippers, moving away from package consolidators.

This is the largest delivery network with the biggest infrastructure that is now actively competing for direct shipment volume.

And lastly, the next big shoe to drop that keeps cranking the dial.

Amazon.

Based on some job postings that went up (and then quickly came down), it looks like Amazon Haul is going global in 2025.

This team is driving two 2025 S-team goals to make haul “Go Big” in the US and launch WW this year. Our team is on a mission to completely reimagine the end-to-end customer journey for Retail products – from the front-end Shopping experiences all the way through the backend supply chain (Seller experience, Operations, . Engineers in this team have the opportunity to work on all Retail surfaces – from Homepage, DP, Search, PurchaseX, P13N, Accounting, Pricing, Tax, Returns, DEX etc. It’s a massive challenge, but also a chance to make a huge impact.

– Amazon

If you don’t know, Amazon Haul is a budget-friendly shopping section introduced by Amazon, offering a wide range of products priced at $20 or less, with most items under $10 and some as low as $1.

The reason why its expansion and continued development will be a problem for last mile carriers is because it gives Amazon more density while also creating more delivery activity.

This will likely mean that they will have to get more trucks on the road.

If you’ve ever designed a last mile network, or had to support a major expansion in activity, you know that you rarely get to expand perfectly.

You end up with a lot of capacity in the system.

This capacity that will be left over from Haul’s expansion will make Amazon even more aggressive in growing their delivery services (in order to fill the trucks and meet the expected profitability margins for the assets).

Key Takeaways:

• It’s a shippers market and will be for some time

• Contracts and volume expectations will become more important (you can get better rates, but the days of carriers allowing too much of the volume to be split to other carriers is coming to and end)

• Who you choose for your service partners is extremely important - some of the carriers you are using today (either directly or through rate shopping) won’t survive. Don’t wait until they tap out to start looking for options

• No one’s technology can out optimize bad density

• Work with service providers that do more more for you than just talk about their technology, automated emails/texts or pictures - these are all table stakes these days

Target’s Investing Billions To (Hopefully) Matter Again

Target hasn’t had it easy over the last few years.

In a lot of ways, they have lost their relevance.

They are struggling to keep up with Walmart. Even with their size, they have a lot less money than the giants they are competing against when it comes to top line sales.

But they aren’t going down without a fight.

The retailer needs to stabilize and clearly define its social stance to rebuild consumer trust and brand loyalty.

Target plans to achieve over $15 billion in sales growth by 2030, investing between $4 billion and $5 billion in stores, supply chains, and technology.

A $15B lift represents over a 10% sales increase from its 2025 fiscal year that just ended.

This is a very ambitious goal for a retailer already doing over $100B a year in revenue.

To achieve it, they are also opening 20 new stores this year, with plans to add 300+ stores over the next decade, alongside numerous remodels.

They are also overhauling the product that’s carried in store and expanding product choices in gaming, home, sports, toys, beauty, and food and beverage, emphasizing private labels such as Good & Gather and Favorite Day.

The point to take away here is that they are pouring a lot of money into trying to re-capture consumer attention.

This will also put pressure on them to expand their marketplace activity as well as their fulfillment services (further eating into traditional 3PL activities).

They recently acquired a major logistics facility in Denver to bolster supply chain efficiency, supporting faster inventory turnover and e-commerce fulfillment. To me, this is the first step in them expanding their capabilities in order to do more.

They will not be able to compete with Amazon or Walmart if they too don’t get into broader sales activity and start focusing on getting more value from logistics activities (supporting the stores and running a curated marketplace isn’t enough anymore).

This means that you will have another major retailer offering brands go to market solutions. Given their size and scale, it will stress smaller 3PLs and service providers who don’t have the capital to keep investing in modern solutions.

Whether Target is successful or not, time will tell.

They do however have enough cash, enough infrastructure and enough of a brand to get to the end of the decade and beyond.

With so much uncertainty in the market related to tariffs and changing macro-economic conditions, retailers like Walmart, Amazon and Target will be the ones who are big enough to command concessions from suppliers while everyone else struggles to keep up.

Urban Revivo Might Be The Biggest Disruptor You Haven’t Even Heard About

China’s Zara.

That’s basically how Urban Revivo is understood to be.

They are a fast fashion retailer from China that’s doing over $1B a year in sales - and they’re coming for the US.

But unlike SHEIN and Temu who are selling direct from China, UR is looking to set up shop and open stores.

In fact, they are set to open their first US flagship store in New York City’s Soho.

Urban Revivo estimates that US and Europe could eventually account for at least 30% of total sales. They’ve also been clear that they see these markets as a key to long term success as the fast fashion industry in China is brutal.

While Urban Revivo’s clothes will sell at roughly four to five times higher than Shein’s ultracheap fashion, moving production closer to overseas markets (like the US and Europe) will save logistics and tariffs cost and keep the brand competitive with similarly positioned rivals such as Zara.

Local suppliers will churn out trendy items, while factories in China still make less time-sensitive ones.

So now we will have a market where you have intense price competition on the low value side.

And you will also have even more competition for fast to market trending items in the mid to upper mid price point.

And it’s coming from companies with billions of dollars of sales and money to keep re-investing into operations.

These types of shifts in the commerce / eCommerce landscape will continue to shift the expectations that brands have on their service providers.

High SKU turnover, ability to handle huge surges in demand and coverage and capability to get product out to stores or consumers very quickly are going to become the battleground over the next 18 months.

This activity will put a ton of pressure on smaller brands, but will also cause even more purchase fragmentation in the market. It will lower everyone’s overall density and make it harder to survive with only a smaller number of customers .

What type of customers are signing?

Are those retailers / brands going to be able to keep up with the changes that are coming?

To maximize your results and stabilize your business, having dialed in and market relevant strategy is crucial.

Take your current plan, compare it to these trends. How would you rank the results.

That’s it for this week. Thanks for being here.