United Parcel Service Inc. dodged a bullet. So did online retailers.

UPS reached a tentative agreement to renew a five-year labor contract with the Teamsters union, staving off a possible strike as soon as next week that could have paralyzed shipments throughout the U.S. and beyond.

The provisional deal, which needs to be ratified by the Teamsters’ 340,000-strong membership in a vote next month, could be a good omen for negotiations between labor and management across several key industries. The UPS negotiations are a key test of unionized workers’ leverage at a time when wage growth is outpacing inflation.

A UPS strike would have directly affected online retailers — including some of the biggest players.

“There are 457 Top 1000 retailers that use UPS as one of multiple carriers, but those other carriers would not be able to absorb the packages that would have gone to UPS had the drivers gone on strike,” says James Risley, research data manager and senior analyst at Digital Commerce 360. “FedEx and USPS are not staffed to pick up the slack that a UPS strike would create, even though this is a quieter time of year for carriers.”

UPS strike impact on online retailers

532 online retailers in the Top 1000 use UPS for their fulfillment — either exclusively or with other carriers. 65.6% of Top 1000 sales come from retailers using UPS.

The Top 1000 is Digital Commerce 360’s database of the largest online retailers in North America, ranked by web sales.

More than half of web sales in the Top 1000 come from merchants using UPS for at least some of their shipments. The cumulative 2022 web sales of Top 1000 retailers using UPS is about $669.98 billion.

However, hundreds of the 532 online retailers using UPS to ship items do not use it exclusively.

They also use other carriers, including:

• FedEx
• USPS
• Pitney Bowes
• DHL

75 merchants in the Top 1000 exclusively use UPS for their shipping. Those 75 accounted for $24.97 billion in 2022 web sales.

Among those that use UPS to ship items, 295 online retailers in the Top 1000 ship via both UPS and FedEx. Similarly, 360 online retailers in the Top 1000 use both UPS and the United States Postal Service (USPS) to ship items.

Good news and contingency planning for online retailers

UPS reaching a deal with the Teamsters union — and in doing so avoiding a strike — “comes as welcome news for millions of retailers and brands across the globe,” said Stephen Beard, vice president of transportation at PFS.

PFS is an ecommerce order fulfillment provider.

“Uncertainty over the last few months has forced brands to consider the worst-case scenario, and the impact such events would have on their customers, and their reputation,” Beard said.

He added that many retailers have highlighted contingency planning as a key area of focus. It’s especially key as retailers begin preparing “for the holiday rush and fulfilling orders during peak season — retails’ busiest time of year.”

Beard said the UPS situation is a reminder that there will always be risks that fall outside retailers’ control. Carrier issues aren’t the only scenario merchants should prepare themselves for. They should also consider adverse weather conditions and staffing problems, he said.

“Having the right fulfillment partner in place can make all the difference when unexpected issues arise, enabling a brand to quickly respond to circumstances and even turn obstacles into opportunities,” Beard said. “Inventory planning and adopting a decentralized fulfillment model is also key. A multi-node approach allows brands to distribute goods across a number of smaller distribution centers (DCs), rather than storing and distributing from one single DC. With the right distributed order management (DOM) technology in place, inventory can be easily tracked across these locations, allowing brands to direct orders between multiple fulfillment points – and in doing so, optimize inventory across channels, reduce the distance of last-mile delivery, and encourage diversification of carriers.”

Terms in the deal

Teamsters President Sean O’Brien cheered the deal, calling it the best ever wrung from the courier.

The union secured higher pay and a number of key concessions from UPS important to its members. Those include eliminating a class of drivers who earned less, air conditioning in new vehicles and an additional paid holiday. In total, the Teamsters estimate that the contract includes $30 billion of new money over the five-year span.

The tentative pact garnered support from U.S. President Joe Biden, who said it “moves us closer to a better deal for workers that will also add to our economic momentum.”

UPS didn’t reveal details of the agreement or confirm the union’s financial estimates, and calculations of labor agreements’ monetary impact often differ due to varying assumptions. A spokesman said UPS would share information on the potential costs and update guidance with its second-quarter earnings report.

Earlier this month, the company said it would hold off on reporting second-quarter earnings until Aug. 8 —  the latest date it’s ever posted midyear earnings since going public in 1999 — to allow more time for the labor talks.

Bloomberg News contributed to this report.

Do you rank in our database?

Submit your data with this quick survey and we’ll see where you fit in our next ranking update.

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.

Follow us on LinkedIn, Twitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.