Since its founding in 1907, United Parcel Service Inc (UPS) has built a robust B2B parcel delivery model. Its exceptional service reputation and cost advantages have created formidable barriers for competitors, allowing the company to offer top-tier wages and benefits to unionized drivers.

In 1985, a new player, RPS, entered the market. Overcoming challenges by introducing innovative features for business clients and adopting an independent contractor model to reduce costs, RPS eventually established itself. Over 40 years, its annual revenue grew from $35 million to over $35 billion (now operating as FedEx Ground)—a testament to its success.

However, since RPS's emergence, the parcel market has segmented into three categories: high-value large parcels, traditional B2B multi-stop deliveries, and single-stop, low-value residential (B2C) deliveries.

With lightweight B2C e-commerce parcels accounting for over 70% of the market, UPS (NYSE: UPS) and FedEx (NYSE: FDX) face challenges due to their high-cost "large-truck delivery" workforce structure, which struggles to meet B2C retail shippers' demands.

B2C deliveries are best suited for gig workers who prefer flexible schedules.

As the only private parcel delivery company with unionized drivers, UPS faces greater challenges than FedEx—it must not only prevent B2C business from shifting to large retailers and startups but also find a growth path for its higher-cost Teamster drivers to efficiently handle residential deliveries.

To retain market share and sustain profitability, UPS should leverage its Teamster union model while integrating low-cost independent last-mile drivers—a model it became familiar with after acquiring Roadie in 2021. Roadie specializes in delivering goods from local stores to nearby consumers.

Here’s the innovative approach: Union drivers operating large trucks capable of carrying hundreds of small parcels would handle "extended middle-mile" transport, delivering packages to over 5,600 UPS Store locations instead of individual homes. Independent gig workers would then collect parcels from these stores and complete last-mile deliveries within a 5–10-mile radius using personal vehicles, eliminating long trips to UPS sorting centers.

Since B2C parcels rarely go undelivered, any undeliverable items can be returned to UPS Stores the next day and sent back to shippers.

This integrated model would also free UPS from relying on the U.S. Postal Service (USPS) for last-mile delivery. In January, UPS ended its USPS partnership due to postal rate hikes, though it recently reached a preliminary agreement to resume "Ground Saver" deliveries via postal carriers. With the "UPS Store + gig worker" model, USPS support would no longer be necessary.

Additionally, this strategy could absorb volumes from USPS’s "Mail Innovation" service, increasing delivery density while saving costs on operating about 25 independent long-haul facilities.

Under this system, union drivers would handle more parcels in extended middle-mile transport; UPS Stores would replace USPS’s final transit points; and Roadie drivers would take over last-mile deliveries from postal carriers.

**Time Is Critical** Our recent commentary, *FedEx’s Path Forward: Adopting a Gig Model to Dominate B2C Deliveries*, sparked strong reactions. Many readers urged FedEx to implement the proposed changes. Given rapid market shifts, first-mover advantage is crucial.

Both FedEx and UPS must act swiftly. While UPS already has Roadie’s last-mile network, its core challenge is collaborating with Teamster leadership to develop an integrated strategy for lightweight, low-value e-commerce parcels.

Partnering with UPS Stores should be straightforward. As franchisees, store owners have incentives to expand and would readily adopt this new B2C delivery approach.

Meanwhile, Roadie’s independent drivers could directly serve UPS, delivering low-cost B2C parcels within their communities. Their mileage would decrease, and familiarity with delivery areas (even recognizing some recipients) would enhance safety.

UPS paid $67 million for Roadie—a negligible sum compared to its brand value and consumer recognition. The integrated model would attract more online retailers, gig workers, and consumers, who would trust uniformed UPS-affiliated drivers over unbranded, random gig workers.

This strategy also helps the Teamsters retain a vital role for drivers in a rapidly evolving market, easing UPS’s path to a new labor agreement in 2028.

With Roadie’s 30,000 last-mile drivers, UPS’s automation, digital tools, middle-mile network, and UPS Stores, the company could weaken startups like Jitsu, Veho, Gofo, and UniUni—even disrupting DoorDash (NASDAQ: DASH) and Uber Eats (NASDAQ: UBER)’s B2C parcel ambitions.

Furthermore, this approach could thwart Amazon (NASDAQ: AMZN) and GrubHub’s plans to deploy similar last-mile models for their own and third-party online orders.

UPS has a narrow window to build this "integrated new model"—one that leverages its middle-mile strengths, crowdsourced drivers, UPS Stores, and brand value to reverse its B2C e-commerce decline.