United Parcel Service lowered its 2024 operating margin target on Tuesday, after new e-commerce customers - identified by industry experts and shoppers as Shein and Temu - flooded its network with slower, lower-profit shipments.

Shein and Temu together send almost 600,000 packages to the United States every day, according to a June 2023 report by the U.S. Congress. That volume already has roiled the air cargo business and appears to be doing the same to the last-mile delivery industry.

During the quarter, volume from the new, unnamed UPS customers "blew up on us. Their demand was much higher than we had anticipated," CEO Carol Tome said in a conference call with analysts.

That drove a shift from premium air services to less expensive ground service and from ground to even more economical SurePost services, where UPS picks up packages and hands about 60% of them off to the U.S. Postal Service for final delivery, she said. FedEx executives previously noted a similar trend among its customers.

money.usnews.com - Ups quarterly profit falls on high labor costs weak small package demand

It doesn't seem to work for many oligipolies across different industries. Cable and mobile companies spend fortunes building bandwidth, yet all the profits seem to flow to the Netflix, Google, Amazon etc. Package delivery also seems to be headed that way, with both UPS and FedEX struggling while the profits seem to flow elsewhere.

Even with the sharp fall in stock price UPS still trading at a fwd PE of 18. I think it has much more to fall. Comcast, Charter, Verizon, AT&T all trade at single digit PEs.