Regional parcel delivery carrier Lone Star Overnight (LSO) said it will expand its coverage area in early September by adding markets in Louisiana and Arkansas and launching service in Illinois, Missouri and Kansas.
The announcement, which was posted last Wednesday on the company’s website, expands Austin, Texas-based LSO’s state footprint to 10. LSO covers every ZIP code in Texas, its core market, and the key commerce centers in Oklahoma that account for two-thirds of the state’s population.
Under the expanded network, LSO will begin service in Kansas City and St. Louis and will offer deliveries to Kansas City’s western suburbs that extend into Kansas and eastward from St. Louis into Illinois. LSO’s Missouri expansion will cover 90% of the state’s population, it said.
In Louisiana, the carrier will add New Orleans, Baton Rouge, Lafayette, Houma and Hammond, as well as other cities located along Interstate 10 that runs across the state’s southern belt. It already serves Shreveport and Lake Charles. In Arkansas, LSO will add the Little Rock metro area and the state’s important northwest quadrant that includes Fayetteville, Springdale, Rogers and other nearby areas. Bentonville, also in northwest Arkansas, is the global headquarters of retail titan Walmart Inc. (NYSE:WMT).
LSO said it expects to reach 43 million consumers with its broadened network, up from 32 million today. LSO said it plans to make ground deliveries the next business day to most of the ZIP codes in the new service areas from its Dallas hub.
The expansion is timed to coincide with the beginning of what is expected to be another robust peak holiday delivery season for parcel-delivery carriers of all types. No one knows if e-commerce activity during this peak season will be as frenetic as last year’s when COVID-19 raged through much of the country and kept people away from stores and malls and glued to their digital devices. However, with e-commerce making strong gains in retail sales before the pandemic and with a decent chunk of brick-and-mortar traffic that shifted online not returning to the stores, the 2021-22 peak is expected to be very strong.
CEO Richard Metzler said in the announcement that LSO’s Southwest-centered coverage area hasn’t changed much over the company’s past 30 years. At the same time, e-commerce and business customers have strongly encouraged LSO to expand its footprint because they are eager to utilize delivery options apart from FedEx Corp. (NYSE:FDX) and UPS Inc. (NYSE:UPS), Metzler said.
FedEx and UPS, delivering through the strongest demand spike in parcel history, raised rates and imposed what many shippers thought were onerous peak-season surcharges. The carriers also imposed caps on volume and, according to Metzler and other industry executives, effectively told big shippers to either accept revised prices and conditions of carriage or go elsewhere.
Shipper anger toward FedEx and UPS remains palpable halfway through 2021, amplified by an early June move by FedEx Freight, FedEx’s LTL unit, to drop 1,400 shipper accounts on roughly 72 hours’ notice rather than providing customers with the traditional 30-day notice period.
“People are mad at FedEx and UPS, and it’s visceral,” Meztler, one of the industry’s most outspoken critics of the carriers, said in a phone interview Tuesday. However, because many shippers are heavily reliant on the carriers to get their packages moved, “there’s nothing [shippers] can do about it,” he said.
Regional carriers experienced the same surges in demand during 2020 as the big carriers. Faced with massive supply-demand imbalances and unwilling to compromise service to existing customers, the carriers were forced to turn away new business as early as August or September.
The delivery landscape heading into the fall and winter is more orderly than it was a year ago, when the shipper mindset was to get parcels moved regardless of cost, Metzler said. At roughly the year’s halfway point, shippers have a better understanding of their peak-season needs and are better able to scale their operations to meet them. For LSO, the hiccups have mostly been on the customer side with IT and operational integrations, Metzler said.
The demand outlook, Metzler said, is and will likely remain very strong through the peak.