Independent Parcel Consolidators on Their Way Out?

Jun 19, 2012 2:16 AM  By

It hasn’t been a good week for independent parcel consolidators. Three days ago Streamlite ceased its operations after nearly seven years and now EquaShip, which was scheduled to relaunch in March, has shut down its operations. Is there a market for independent parcel consolidators?


EquaShip CEO Ron Wiener explained his decision.

“Bottom line is we couldn’t raise the capital required for the restart,” Wiener said. “Financial instability of the independent parcel consolidators was a substantial risk factor that investors had qualms about – only to be proven right by the demise of Streamlite. Since our business plan relied on the viability of at least two of these consolidators – and there aren’t that many to choose from — we couldn’t overcome this hurdle despite having proven unequivocally that there was demand for our service.”

Wiener said the real story “isn’t about us, it’s about how FedEx and UPS have extended their duopoly into the postal consolidation space, creating an environment that is choking out alternative carriers. One third of FedEx/UPS’s ground parcels are now going through their consolidator divisions (SmartPost/SurePost). Streamlite was rumored to have raised over $100 million of venture capital, and have revenues of nearly $200 million, and they still couldn’t reach profitability in this environment.”

EquaShip was “live” operationally for a total of 12 weeks in November and December last year, and January of this year. It suspended operations in February to re-engineer its transportation network for faster package delivery times, larger geographic coverage, and more service options. Wiener said the company’s transportation partner — Blue Package Delivery – “was unable to consistently meet our customers’ expectations on transit times,” and often “missed our published transit times by several days.”

The Seattle-based company’s relaunch was scheduled for March 2013.
Postal consolidation was a “relatively sleepy, but nicely growing industry that had been around since the late 1980s, Wiener explained.

“When FedEx and UPS entered the market through the acquisitions of Parcel Direct and Regional Mail Express they brought their market power to bear. The smaller competitors do not have tens of thousands of sales reps and billions of dollars in advertising to promote their businesses. They also offer only parcel consolidation and maybe one or two other services so it’s harder to compete with the two giants who offer international and air express as well. “

Billed as America’s fourth parcel carrier, EquaShip targeted small- to medium-sized ecommerce shippers and claimed potential savings of 26%-77% compared to FedEx and UPS Residential Ground retail rates.

Gerard Hempstead, president of Hempstead Consulting, said the marketplace “had been screaming for a competitor to UPS and to FedEx.” Hempstead said EquaShip resembled FedEx SmartPost, UPS Surepost, DHL Globalmail, Streamlite, and Newgistics, “but without any network infrastructure of its own.”

Hempstead said EquaShip’s back end had been Blue Package and “that didn’t work out to the satisfaction of Equaship and they never really addressed the front end collection or customer hand holding piece. Ergo they had a very short life cycle.”

Hempstead is saddened by the news of Streamlite and EquaShip because “shippers need choice. Without choice, the price of service may go up rapidly. So the landscape for shippers is really UPS and FedEx, the USPS and the hybrid users of the USPS ( DHL Globalmail, Newgistics, Blue Package, Parcel Pool).

Hempstead said the only potential player who already has sufficient critical mass to compete is Amazon.

Jim Tierney (jim.tierney@penton.com) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.