U.S. logistics company UPS is cutting back on low-margin e-commerce deliveries and focusing instead on the returns market.
According to the logistics industry on the 22nd, UPS subsidiary Happy Returns will add 1,700 returns intake locations in the United States, expanding the total to 10,000. The strategy is to raise its share in the U.S. returns market, which reaches $706 billion (about 1,043 trillion won) annually.
The Wall Street Journal (WSJ) cited the profit structure as the reason UPS is focusing on returns. Regular deliveries require handing off items one by one to individual consumers, which is costly, whereas returns allow consolidation, processing multiple items at once. For example, instead of delivering 20 items separately, 20 returns can be sent to a single logistics center to boost efficiency. In this process, WSJ said, cost savings and margin improvement can be expected.
This strategy aligns with UPS's trend of reducing Amazon volume. Over the past few years, UPS has gradually scaled back low-margin Amazon deliveries. In 2026, it plans to cut volume by more than 50% further. It is seen as a move to break away from a structure where "even with a lot of deliveries, little is left over."
The expansion of the returns network is also accelerating. The new locations are existing UPS Authorized Shipping Outlets, extending to neighborhood small stores. As a result, 79% of the U.S. population will be able to access returns services within a 5-mile (about 8 km) radius.
Happy Returns' strength is "easy returns." Consumers can drop off items in stores without a box or shipping label. Accepted items move to three logistics centers in the United States, and some high-priced products are authenticated using artificial intelligence (AI). The measure aims to reduce return fraud that attempts to swap in similar items.
Speed is also a competitive edge. Leveraging the UPS logistics network, returned items make it back to sellers' warehouses in as little as 3.6 days, averaging 7 days. For retailers, the ability to turn inventory quickly is an attractive proposition.
Founded in 2015, Happy Returns was acquired by UPS from PayPal in 2023. It currently handles returns for major retailers including Gap, Shein and Skims.
Competition over the returns market is also heating up. FedEx will launch its "Easy Returns" service in 2025 and has secured roughly 3,000 locations nationwide. Amazon is also operating a returns intake network of more than 10,000 locations, including Whole Foods and UPS stores.