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Category icon Shipping Rate Optimization Calendar icon Jun 09, 2025

The Fragmentation of the Small Parcel Market: Risks and Opportunities for Shippers

Understand what’s changing, what’s at stake, and how your business can stay competitive in a fragmented carrier environment.

A delivery truck filled with boxes of goods going to customers and buyers

The small parcel market is undergoing a significant transformation. As the industry becomes increasingly fragmented with regional carriers, gig-based delivery services, and alternative logistics models gaining traction, shippers are facing a new set of challenges and opportunities. The traditional reliance on a few national carriers is giving way to a more complex and competitive environment, making a flexible, well-informed small parcel shipping strategy more critical than ever.

In this article, we explore what’s driving this shift, the risks it poses to supply chain stability and cost control, and the strategic moves businesses can make to stay agile and competitive amid the disruption.


Small parcel market trends: The shifting carrier landscape

First, let’s go over what’s happening in the current small parcel shipping market. In particular, new players, what to keep an eye on, and what we’re seeing at iDrive Logistics.

From the Big 3 to the Fragmented 50: Why carrier loyalty no longer works

The small parcel market is rapidly fragmenting. For decades, shippers relied on the “Big 3” (UPS, FedEx, and USPS) to handle nearly all parcel deliveries in the U.S. We’ve seen this shift drastically as merchants look to smaller partners for regional advantages and cost savings.

Amazon Logistics now delivers more than 25% of all U.S. parcels, and not just Prime orders. Taking a page out of Amazon’s book, major retailers like Walmart and Target are building their own fulfillment networks as well, bypassing traditional carriers entirely.

At the same time, regional and gig economy carriers like OnTrac, LaserShip, UniUni, and SpeedX are aggressively competing in the sub-5-pound delivery space, which is the fastest-growing segment in eCommerce shipping.

A chart showing market share by carrier since 2019
The data used in this chart courtesy of Shipmatrix

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The risks of carrier fragmentation

There are some benefits to more carrier competition on a smaller scale, but there are also plenty of risks with more moving pieces to keep an eye on.

Why whippers face rising costs, complexity, and customer expectations

As the market splinters and we start to see more carriers and offerings, shipping strategies that once worked are quickly becoming outdated. Without a flexible approach, brands risk increased costs, poor service levels, and operational blind spots.

Some of the key risks that shippers face include…

  1. Unpredictable pricing: UPS and FedEx continue to raise rates and adjust surcharge structures. UPS alone has changed its fuel surcharge tables 14 times in the last three years.
  2. Weakened visibility and reliability: USPS struggles with tracking and delivery performance. Gig carriers can be fast, but they often lack national coverage and consistency.
  3. Carrier limitations: No single carrier fits every parcel type. Lightweight, residential deliveries are costly for legacy carriers; regional carriers can’t serve all ZIP codes.
  4. Shipper confusion: The “best” carrier depends on factors like weight, zone, and speed. Without data or dynamic routing tools, many brands end up overpaying or underdelivering.

Carrier diversification is not only smart, it’ll be crucial to healthy margins and happy customers. By taking a multi-carrier shipping approach, you and your customers can choose the best rates for different service levels, dynamically.

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Your opportunity to implement smarter shipping strategies

If you aren’t already, 2025 is the time to use multi-carrier shipping to strengthen your logistics. This approach enables shipping cost optimization, real-time comparisons for the best rates and reliability, and much more.

How leading brands are thriving in a fragmented market

While some brands feel stuck, others are turning fragmentation into an advantage by building flexible, multi-carrier shipping strategies.

Here’s what that looks like in practice:

What a multi-carrier shipping strategy involves:

  • Route by parcel profile: Match each shipment to the carrier best suited for its weight, size, destination, and urgency.
  • Leverage multiple carrier relationships or aggregators: Negotiate directly or work through platforms that pool volume to unlock better rates.
  • Rate shop every shipment: Use technology that compares real-time rates, fuel surcharges, and transit times to select the best option dynamically.
  • Pilot new carriers in low-risk zones: Test regional or gig carriers in specific markets before scaling.
  • Use strategic fulfillment partnerships: Work with 3PLs or fulfillment networks that offer access to multiple carriers, including those that may be otherwise unavailable to smaller shippers.

Tip: Not all carriers are accessible to all brands. Partners like iDrive Logistics can help connect you to national, regional, and gig economy carriers (and offer the tech to manage it all in one place).

The smartest shipping strategy today is one that can adjust and adapt to cost, to parcel type, and your customer’s expectations.

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What to watch in 2025 and beyond

The iDrive Logistics team has watched the small parcel shipping landscape for decades, and cut their teeth with some of the big 3 carriers. Here are a few predictions and tips from our experts and leadership team to stay ahead in your shipping strategies this year and beyond.

Parcel market predictions from iDrive President Glenn Gooding

The parcel market isn’t just evolving, it’s being rebuilt in real time. From retailer-owned networks to national carrier pullbacks, the next few years will reshape how shipping works in the U.S.

Here are the top five trends to watch:

  1. Amazon Logistics will become a full-scale national carrier: With 25%+ parcel volume, its own air fleet, and a fast-growing delivery network, Amazon is expanding into commercial shipping—not just serving Prime.
  2. UPS is prioritizing profit over market share: In early 2025, UPS announced 20,000 layoffs and over 100 facility closures. By pulling back from low-margin Amazon volume, they’re focusing on dense, high-yield shipments, but creating gaps in coverage.
  3. Retailers will grow their own delivery networks: Walmart and Target are converting stores into last-mile hubs, fulfilling their own shipments. These “unavailable” parcels bypass UPS, FedEx, and USPS entirely.
  4. Gig economy carriers will expand, but stay regionalized: Carriers like UniUni aim to cover up to 70% of the U.S. — but rural gaps will remain. These players are ideal for lightweight residential shipments, but not a standalone solution.
  5. Parcel growth will be misleading: ShipMatrix forecasts 4% annual growth through 2027, but much of it will come from retailer-owned and Amazon-dominated networks. Traditional carriers will fight over a static or shrinking share.

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Turning shipping market fragmentation into a strategic advantage

The era of one-size-fits-all shipping is over, and that’s a good thing if you’re ready to adapt.

Today’s parcel market rewards brands that are flexible, data-driven, and aligned to the realities of modern eCommerce delivery.

Now’s the time to ask:

  • Are we using the right carriers for the right shipments?
  • Do we have the flexibility to adapt to shifting service levels or surcharges?
  • Can we compare performance and cost across multiple options?
  • Are we still shipping like it’s 2020, or are we built for 2025?

Practical next steps for your small parcel shipping strategy

  • Audit your current carrier mix to identify dependencies and inefficiencies
  • Analyze your parcel profile to match carrier types by weight, zone, and cost
  • Use tech that enables dynamic rate shopping and routing
  • Explore fulfillment partnerships that unlock access to alternative carriers
  • Test, measure, and iterate. Even small changes can yield big returns

Need a second opinion? iDrive Logistics works with brands to build resilient, cost-effective shipping strategies. (But no matter who you partner with, ensure your shipping strategy evolves with the market.)

Because in a fragmented landscape, the most successful brands aren’t the biggest. They’re the most adaptable.

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